Thursday, August 31, 2017

Digital Payment and Banking Card Market is Evolving

Following a disappointing year in 2016, when the Europay, Mastercard and Visa (EMV) payment cards market nearly came to a complete halt, ABI Research now expects that the market will bounce back this year with an anticipated annual growth rate of 4.6 percent.

The EMV market problems began in 2016 with overstocking issues in the U.S., causing shipments to drop by 18 percent. Additionally, the market in China reached saturation and was further impacted by new legislation limiting the number of accounts one citizen is permitted to own at a singular bank. Both issues in China resulted in a card shipment decrease of 8 percent YoY.

Global EMV Market Development

All eyes are now firmly fixed on the U.S., China, and India, driven by an expectation that over 56 percent of all EMV cards issued globally in 2017 will be issued into one of these three countries.

India will be one of the positive growth factors in the near-term future, currently in the early stage of EMV migration which will help push EMV card shipments to the 3.2 billion mark by 2018. Further growth is expected due to the recent demonetization push by the Indian government to help stem corruption alongside its national payments network, RuPay, implemented to improve access to digital banking facilities.

Overall, approximately 259 million EMV cards will be delivered to India in 2017.That number is expected to increase rapidly over the next three years as issuers look to meet the EMV mandate deadline.

Alongside India, focus needs to shift to the remaining volume opportunity, including Indonesia and the Philippines, both of which will prove pivotal in growing global payment card shipment volumes from 2019 onward.

"Strategic regional positioning is going to prove a vital aspect for the leading payment card vendors including Gemalto, OT-Morpho G&D, GoldPac, CPI Card Group, and Valid to take full advantage of any remaining volume opportunity. On top of this, there remains a significant opportunity in contactless migration, partially in the U.S. and potentially India moving forward," said Phil Sealy, principal analyst at ABI Research.

For 2017, both the U.S. and Chinese markets will struggle and are likely to record another year of flat growth. Small fluctuations and changes in market dynamics in these two countries can create a significant ripple effect on the global stage. However, the outlook is positive as U.S. stocking levels begin to normalize and the Chinese market returns to normal issuance levels.

Outlook for Digital Payment Technologies

However, Sealy does not believe strategies should be focused solely on increasing volumes and migration strategies from contact to contactless.

He explains his thinking, "The next opportunity is in next generation payment cards, most notably dynamic card verification value (DCVV) cards that help address card-not-present (CNP) fraud and biometric sensor integration into payment cards which will add an additional layer of security."

However, adding security is not enough of a reason for issuers to justify heavy investment into new technologies. Any future card-based technology investment will need to be offset by additional value.

For example, using biometric sensors to increase contactless spending limits or providing and utilizing new technology as a platform from which issuers can extend current three-year card expiration dates to four or five years.