Strategic Guidance for Biometric Payment Card Vendors

Today, the biometric card market is very much in its early days. Only a handful of commercial launches have taken shape and most projects are in the pilot stage. However, the technology has been proven to be a worthy investment and card issuers have gained more trust. With that, most of these pilot stages are expected to migrate to commercial launch in late 2022 or at some point in 2023.

Market Overview

ABI Research has compiled two different forecasts regarding biometric payment card issuance. The first forecast, scenario one, is conservative and assumes price points will still be high for the foreseeable future. On the other hand, scenario two is a more optimistic outlook for the biometric payment card market and assumes low price points could be achieved in 2023.

Scenario One Forecast

In ABI Research’s scenario one forecast of the biometric payment card market, the following will occur:

• Card issuance will grow from 0.14 million units in 2021 to 40.8 million in 2026.
• The price point will range between US$13 and US$17 in late 2022/early 2023.
• Like BNP Paribas, 2022 commercial launches will target premium account holders.
• The year 2023 will mark the first one in which more than 1 million units ship.
• The Average Selling Price (ASP) will decrease to around US$10 in 2024/2025, resulting in significantly more demand as issuers start offering biometric cards to lower-tiered customers. The cost of the card will still be passed onto the customer directly.
• The cost ratio of a biometric payment card will be 5X that of a contactless payment card.
• Card issuance will be most impressive in Asia-Pacific and Europe (91% of the total market by 2026) because these are the most mature contactless payment markets, making biometric solutions easier to implement.

Scenario Two Forecast

ABI Research’s scenario two forecast is considerably more aggressive and outlines the potential if certain milestones are met promptly. The following will materialize in scenario 2:

• The ASP of a biometric payment card will go down to about US$10 in 2022 and sub-US$10 price points will be achieved in early 2023. A US$5 price will be seen in 2025 when banks will no longer charge a fee for the card.
• In 2026, 254 million biometric payment cards will ship, up from 0.14 million in 2021.
• 2022, not 2023, will be the first year when more than 1 million units will ship, thanks to 10 to 15 commercial launches from banks.
• Lower-tiered customers will begin to be focused on by 2023—when 11.7 million biometric payment cards will be issued.
• The cost ratio of a biometric payment card will be 3X that of a contactless payment card.
• 2022/2023 card expiration dates will give rise to the need for significant card replacement efforts by 2026.
• Asia-Pacific and Europe will experience nearly 128 million annual shipments by 2026.

“Fast forward to today and it remains clear that ecosystem players are working toward a common goal in terms of readying for mass production and significant volume orders. Significant ecosystem efforts continue to be placed on expanding partner ecosystems, targeting Tier Two smart card vendors to add biometric payment cards to their respective portfolios, as well as payment network certification.” – Phil Sealy, Research Director at ABI Research

Key Decision Items                          

Aim for Much Lower Price Points

While the current US$20 to US$30 ASP is far too high for the mainstream, it’s a tremendous step from the original US$45 ASP. Still, price points have been too expensive to justify for the average banking customer, and biometric cards have been exclusive to customers who pay for a premier account with a monthly fee.

To hit the mainstream, biometric card issuers should aim for a price of around US$4. While biometric card issuers may have to absorb some of the costs, industry players must continue finding ways to reduce development costs by simplifying card architectures, using more efficient components, and improving manufacturing processes. Biometric card adoption is expected to really take off in 2024/2025, when the ASP becomes roughly US$10.

Prepare to Increase Contactless Transaction Limits

Given the more hygienic and convenient nature of contactless payment, this form of transaction was a big winner during the COVID-19 pandemic—and is expected to become more popular over time. About 100 countries raised contactless transaction limits during the pandemic to reduce.

Transaction limits are expected to remain for good as consumers turn to contactless payment solutions. To accommodate security concerns, banks and financial institutions should embrace biometrics to add an extra layer of authentication.

However, a biometric sensor must be required for every transaction instead of being reserved for high-value transactions. If the technology is to become a mainstay, continuous usage is necessary.

Consider What the Enrollment Process Will Look Like for the Customer

In last year’s State of Cyber and Digital Security whitepaper, one of our analysts’ key recommendations was for biometric payment card vendors to focus on remote enrollment solutions. Remote match-on-card is the preferred enrollment option among card issuers and it allows a customer to onboard a biometric payment card from anywhere in the world.

However, this process requires additional costs like the enrollment sleeve, which can cost up to several dollars. Card issuers and their partners should explore multi-use enrollment sleeves. The customer enrolls remotely with the device and then sends it back to the issuer before future customers use it. Not only does this keep costs down, but it also aligns with the sustainability efforts of banking brands.

Ecosystem players have also stressed the importance of standardization and certification of remote enrollment devices. When card issuers know a device is compatible across different card types supplied by different vendors and with various sensors, this lets them shop for biometrics solutions more aggressively. As convenient as remote enrollment is, issuers should mix their approach with other options, such as in-branch and via mobile, to meet the needs of every customer.

Regard Biometric Payment Cards as a Solution, Not a Product

Instead of looking at a biometric payment card as a product, it should be viewed as a comprehensive solution. Beyond the card itself, there’s the enrollment registry and educational campaigns.

Without a proper enrollment strategy accessible to all customers, biometric cards will not be a lucrative investment. Moreover, user bases need to learn the benefits of biometric payment cards, see how enrollment works, and address their security concerns if they purchase the cards. Aggressive advertising, as the BNP Paribas case study goes to show, is a must early on.

Smart Card Vendors Should Also Target Neo/Challenger Banks

Many neo/challenger banks already offer metal cards via monthly subscription integration, making these companies a good fit for the physical-digital convergence. Leaders in the neo/challenger space monetize their freemium users by offering physical payment cards, among other things. And since these companies are heavily focused on card differentiation, they will undoubtedly seek out biometric cards to expand their product portfolios and generate new revenue streams.

Key Market Players to Watch

• Fingerprint Cards (FPC)
• IDEMIA
• IDEX Biometrics
• Infineon Technologies
• Samsung LSI
• STMicroelectronics
• Thales
• Zwipe

Dig Deeper for the Full Picture

To learn more about the key drivers, trends, and forecasts for the biometric payment card market, download ABI Research’s Biometric Payment Card Developments, Projects and Market Opportunities research analysis report.

Not ready for the report yet? Check out our following Research Highlights:

• How the Payments Market Is Solving Environmental Concerns
• An Inside Look at the Global Mobile Wallet Market as 2022 Concludes

This content is part of the company's Digital Payment Technologies Research Service.