Smart cards are evolving - but in which direction?

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By: Wise Marketer Staff |

Posted on September 7, 2004

Smart card technology manufacturers have been encouraged by the growing number of innovations in the world smart card market, and by the increasing acceptance of smart card technology for a range of applications, including payment cards, customer loyalty, transport ticketing, identity cards and so on.

A new Frost & Sullivan report, entitled 'World Smart Card Markets', has revealed that unit shipments in the total smart card industry totalled 2.02 billion cards in 2003 and are projected to reach 3.11 billion cards by 2008. "A number of smart card segments seem to offer immense potential for growth," explained Frost & Sullivan research analyst Karthik Nagarajan. "Most notable of these is contactless technology, which has been fairly successful in applications such as banking, transport, and security."

Protocol troubles
However, future expansion in those application areas is likely to be threatened by the multiplicity of protocols. If contactless technology is to move forward, interoperability must be achieved, as in the case of contact cards where the standards are clearly defined at every level.

EMV (Europay, MasterCard, Visa) migration in many parts of Asia-Pacific, Latin America, Brazil, and parts of Mexico, is also expected to boost the uptake of smart cards. However, in North America, chip based banking cards are only used as a product differentiation measure, according to Nagarajan. To make headway in these regions, banks and card associations are trying to provide customers with alternative value additions; Unlike Europe and other parts of the world, the relative absence of a high card fraud rate in North America has made it almost unnecessary for banks to opt for chip cards.

Security developments
Security concerns, however, have been evident in the enterprise security market. With many companies in North America and Europe having identified smart cards as the ideal platform for the integration of physical and logical authentication, they have become increasingly popular. "Even while the efficacy of these projects cannot be denied, the application and infrastructure costs are likely to prove prohibitive, especially for smaller enterprises," said Nagarajan. "Unlike banking, security applications involve micro-controller cards with higher memory capacity and higher procurement costs."

ID schemes
Smart card adoption is also likely to receive a boost from the growing demand for government IDs, especially in Asia-Pacific and North America. The drive includes National ID schemes, driving license, and government employee ID and health cards. The success of projects such as MyKad in Malaysia, SMARTICS in Hong Kong, Taiwan Health Card, and the US Department of Defense's Common Access Card project are likely to help in expanding the market. Further, developments like the South Korean government's decision to change all public official ID cards by 2005, promise high growth for this market in the future.

High-end SIMs
And the growing popularity of high-end SIM cards for mobile phones and devices is also likely to positively impact the smart card market. Many vendors have already expanded their product lines to include high-end cards, enabling them to move into newer telecom applications and to counter price decline. "Higher end SIMs are also likely to receive a boost from the continuing migration of time division multiple access (TDMA) to global system for mobile communications (GSM)," noted Nagarajan. "Growing competition among different operators is likely to make the accommodation of advanced data and voice services increasingly important."

About the report
The World Smart Card Markets report is part of the Frost & Sullivan Global Smart Card Subscription, and evaluates the uptake of smart cards in four major geographical markets:
·  Europe, the Middle East, and Africa (EMEA);
·  North America;
·  Latin America;
·  Asia Pacific.

The report evaluates the performance of leading players (by unit shipments) in two major smart card segments: memory and micro-controller cards. It provides detailed profiles of regional industry participants with an analysis of their revenue potential, and it identifies opportunities for market penetration.

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