Enrollment Innovations and Pricing Shifts Driving Biometric Cards to Market Success

The biometric card has secured a place, albeit somewhat niche, in the smart card market. Currently, 29 pilot phase projects and 15 commercial launches have been identified. Championed by the payment card end market, the biometric card has become the premier solution to achieve contactless card authentication and provide a next-generation contactless payments experience without transaction limits. Many ecosystem vendors are in discussion, forging partnerships and working toward preparing the biometric card market for mass-production orders, achieved at more palatable price points than seen in previous years.

While Tier One smart card vendors are no stranger to the solution, recent and continuing developments are opening the biometric card as an option further down the stack, targeting Tier Two smart card vendors and their respective portfolios. End markets, including access control, are closely following the biometric card opportunity, with pilots already underway at Richmond Airport and BNP Paribas, which will be examined by the wider ecosystem as to their viability on a wider scale. The biometric card is seeing the steady resolution of the two key market inhibitors, which, to date, have held the solution back from mass-order volumes—pricing and enrollment.

A significant amount of market emphasis has been focused on prioritizing architecture and product simplification, developing cost-effective enrollment solutions, and securing higher order volumes at the point of commercial launch. With the historical market entrance price around the US$45 level, the market then saw this decrease to approximately the US$20 to US$30 range by 2H 2022. As the market stands in 2023, architecture simplification has seen ongoing development, which has caused price points to decline further to approximately the US$13 to US$15 mark. Now, many market vendors are of the opinion that, with a sufficiently high tender volume, the market will see a per-price card finally land at the much-coveted US$10 mark even as early as 4Q 2023.

Ecosystem players have suggested that one key issue to achieving this is the profit margin that is being sought, with some suggesting this could operate around the 50% per card mark. The result is another obstacle to the wider ecosystem achieving pricing milestones of US$10 and, eventually, US$5 per card. By setting up a margin at a lower point—for example, 30%--this will lower the premium earned per card, but will open up the possibility for higher-volume orders, securing a lower price point through economies of scale and production efficiencies. Furthermore, performing development in-house instead of purchasing a pre-existing external product will further help to decrease the per-card Average Selling Price (ASP). However, pricing levels cannot be pinned on the issuer side alone and ABI Research believes it will require efficiency from all market players, including biometric sensor vendors, secure Integrated Circuit (IC) vendors, and module vendors, to achieve these coveted price points.

Further development on solution optimization is certainly needed to lock in the market standard ASP of US$10, which has become the de-facto price point to achieve order volumes of a larger size and will also support issuers being able to front the cost. Industry players are continuously assessing each stage of the biometric card lifecycle, from transport and materials to personalization, manufacturing, and enrollment in order to minimize pricing.

The second critical obstacle in the biometric card market is how best to enroll the cardholder’s biometrics. First, the enrollment sleeve as a solution is not sustainable, with the payments market, in particular, under scrutiny to reduce carbon output and lower first-use plastics, not just as it relates to the physical card, but in the wider ecosystem in terms of distribution of card information, etc. The enrollment sleeve, a potentially disposable plastic device, draws unwanted attention in a market with rapidly shifting attitudes among eco-conscious consumers and regulators. While developments have been made to construct the enrollment sleeve of different materials, with solutions made of cardboard already visible in the market, this does not eliminate electronic waste, with internal components and batteries still unable to be recycled.

On the other side of the spectrum is the requirement to lower per-card costs as much as possible and to standardize offerings. As it stands in 2023, ABI Research sees the biometric payment card, in particular, as a solution, rather than a product and does not see the biometric payment card in a position to remove the enrollment sleeve altogether, as many cardholders will still need one. Industry best practices, as of 2023, include accommodating the full range of enrollment options, supporting in-branch enrollment (where sleeves have the potential to be easily re-used), catering to those who wish to use their Near Field Communication (NFC) smartphones, and offering an enrollment sleeve to those who cannot use another method.

One universally received message from key ecosystem vendors is that the market for biometric payment cards has a clear need for enrollment sleeve standardization. If the industry can move forward, secure in the knowledge that there is certification supporting the enrollment solution, the issue of a fragmented ecosystem as it relates to different vendors, card types, and sensors is removed altogether. The payment market is no stranger to a multi-sourcing approach, and having the security of standardization supports the market in circumventing enrollment process inhibitors and allays fears of being trapped in a contract with any one vendor. In a preferable scenario, the movement toward standardization in the enrollment solution would be led by Europay, Mastercard, Visa (EMV), which has already become the authority on payment interoperability and standardization across the globe. Of course, such an approach is likely to arrive later in the forecast period around 2025, and financial institutions should be informed by payment networks about their options in terms of enrollment and industry best practices to provide a seamless onboarding process for new biometric cardholders and for prospective new entrants to the market.