Frost: Government, Micro-payment Applications Boost Contactless Smart Card Market Growth

April 13, 2007 // Published as a news service by IHS

While the U.S. Visa Waiver Program deadline forces participating countries to hasten their e-passport rollouts, analysts said the future of the micro-payment segment also looks promising, with its successful introduction in North America, Europe and parts of Asia.

Recent analysis from Frost & Sullivan of the world contactless smart cards market found earned revenues of $408.9M in 2005, with estimates to reach $1,636.2M in 2011.

"The e-passport segment made big strides as interoperability efforts intensified, impelled by a heightened sense of urgency for more secure and sophisticated travel documents," said Frost and Sullivan industry analyst Michelle Foong.

"The payment market also saw increased uptake as users across more developed markets warmed up to the idea of contactless payments."

However, analysts said the increasing use of contactless smart cards in payment, transit and identification raises questions from privacy and human rights advocate groups owing to the lack of understanding about the technology and the confusion between radio frequency identification (RFID) tags and contactless smart cards.

While RFID tags are designed to be cheaper and less secure for applications used in supply chain management and the tracking of non-human goods, analysts said contactless smart cards are made to be more secure and reliable so that even highly confidential and private information can be transacted and stored.

"This confusion highlights the urgent need for market participants and end-users to crystallize their understanding of the two different technologies at work here," said Foong. "This understanding is critical for tapping the full potential of the contactless smart cards market."

Analysts said vendors and government agencies should initiate greater efforts to promote awareness and demonstrate that contactless smart cards can be implemented in a highly secure method and can be relied on for secure transactions in payment, health and identification. Besides alleviating user anxiety, market participants should also address transitory rollout issues.

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"However, the market is really poised for growth given that these cards are really proving their worth in the convenience of contactless micro-payments, rapid success in mass transit applications and the rise of mobile payments," said Foong.

Source: Frost & Sullivan.