Technology | Media | Telecommunications

Monday, January 11, 2021

Global Pandemic Drives Digital Payment Market Growth

While forward-looking banks and other progressive financial service companies explore ways to develop new eCommerce offerings for online customers, there's still growing momentum within some legacy organizations to pursue an enhancement to traditional in-store payment technologies.

Up to 2.5 million biometric payment cards will be issued in 2021 as the market reaps the benefits of significant ecosystem efforts, tailored specially to help reduce product cost, improve yield, and simplify manufacturing processes, according to the latest worldwide market study by ABI Research.

Today over 20 biometric payment card pilots are active globally, and the first commercial launch, by BNP Paribas, was announced earlier in 2020. The biometric payment card is a form-factor to help enhance secure authentication, providing a new 'contactless' Point-of-Sale (POS) payment experience.

Digital Payments Market Development

"It’s taken time for the biometric payment card market to take shape because it is the most complex card form-factor ever developed. First-generation biometric payment card solutions can command an Average Selling Price (ASP) anywhere between $20 and $30, significantly higher than today’s $1 to $2 mark for a contact or contactless payment card," said Phil Sealy, research director at ABI Research.

According to the ABI assessment, deployment cost is one of the most significant inhibiting factors keeping the biometric POS payment card form-factor firmly within the piloting and evaluation phase.

This slowly emerging POS market is moving in two developmental directions, away from discrete components and from distributed component architectures toward integrated solutions.

This is being achieved by two primary market developments: 1) a system-on-package approach, integrating some of the componentry onto an ASIC, reducing the total number of components required, 2) a single silicon approach whereby an inlay consists of a single chip and sensor.

According to Sealy, "Next-generation biometric payment card products will likely reduce the cost per unit to within the $13 to $20 range per card, dependent on volumes. Most second-generation products will become available at the back end of 2020 or early 2021."

Despite the many 2020 market positives, the biometric payment card has not proven immune from the COVID-19 pandemic. Many planned pilot projects were predictably deferred by 6 -9 months.

As the legacy debit and credit card issuers shifted spending priorities, they became more conservative with innovation spending and pivoted toward emergency management to combat the pandemic, subsequently shifting their budgets and redirecting their priorities.

Although COVID has impacted the biometric payment cards market, it has also stimulated a significant push toward digital payments, particularly contactless. As a direct result of the pandemic, contactless transaction limits have increased in over 100 countries globally, in a bid to reduce physical interactions at the point of sale and/or physical interaction with communal devices.

The need to limit human interactions in retail stores and an emphasis on hygiene is further accelerating contactless issuance. These higher transaction limits could be considered a significant signal of intent that contactless could ultimately become the de facto in-store POS payment type.

Outlook for Digital Payment Applications Growth

"This lends itself extremely well to innovative card form-factors, such as the biometric payment card, designed to bring Strong Consumer Authentication (SCA) to address the growing presence of Card Present (CP) contactless fraud, but also privacy, thanks to a biometric match-on-card authentication method," Sealy concludes.

I believe that as more fintech start-ups enter the digital payments arena, we'll see the introduction of innovative new service offerings that will further disrupt financial services complacency and the legacy POS payment vendor marketplace.

Most traditional POS vendors are still focused on attempting to prolong the life of their in-store devices and associated financial services partner's transaction processing services. That said, current global retail market trends are clearly not favorable to maintaining the status quo. The future favors online digital payments.