Smart Card Market Dynamics – Opportunities and Challenges

The smart card market is projected to reach USD 16.9 billion by 2026 from USD 13.9 billion in 2021; it is expected to grow at a CAGR of 4.0% from 2021 to 2026. Major drivers for the growth of the market are surged demand for contactless card (tap-and-pay) payments amid COVID-19, proliferation of smart cards in healthcare, transportation, and BFSI verticals; increased penetration of smart cards in access control and personal identification applications; and easy access to e-government services and risen demand for online shopping and banking.

Market Dynamics:

Driver: Surged demand for contactless (tap-and-play) payments amid COVID-19

The consumer awareness about the benefits of tap-and-pay cards and the use of these cards was already trending upward before the pandemic. However, with the outbreak and the spread of the COVID-19, the use of contactless payments grew quickly. Amid the pandemic, which obligates limited contact and social distancing, people buy groceries, household items, etc., using contactless payment options. Consumers aim to limit their exposure during transactions. According to research carried out by Fiserv (US) in May 2020, people consider contactless (tap-and-pay) cards as the fastest and the safest way to pay.

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Restraint:: High infrastructure costs, along with security and data theft concerns

Smart cards have generated a great deal of interest among consumers in recent years owing to the advantages offered by them. However, their cost is one of the factors that restrain the growth of the smart card market. The initial capital investments required for setting up smart cards for access control and other applications are high. Smart cards require readers to read encryptions and obtain the information to provide physical or logical access. The deployment of these readers involves additional purchase costs. The average price of smart card readers varies from USD 50 to USD 300. The costs of smart cards range from USD 2 to USD 10. Costs of these cards increase with the use of chips that have high capacity and offer highly sophisticated capabilities. Thus, equipping employees with multifunctional smart cards is expected to require more initial investments than those required by conventional cards.

Opportunity: New mode of information security of users enabled by blockchain

Blockchain is a revolutionary technology that helps businesses develop fast and secure applications that fulfill stringent security requirements. Smart cards can effectively manage cryptographic keys, thereby enabling efficient and secure transactions in blockchain applications. They act as vaults for storing cryptographic keys. When smart cards are connected to the Internet through POS readers, the keys stored in them can be matched with keys stored in online libraries. If the match is successful, users are authenticated. This is expected to help banks and other ecosystem players secure and authenticate the identity of users in an improved manner, thereby reducing instances of cyber thefts.

Challenge: Risen proliferation of digital identity cards

Digital identity cards are the electronic equivalent of identity cards. Unlike paper-based identity cards such as driving licenses and passports, digital identity cards can be authenticated remotely over digital channels. This results in unlocking their access to banking services, government schemes, educational facilities, etc. It is expected that in the next three to four years, mobile devices will serve as digital identity cards to access enterprise services and data.