New-Tech Europe Magazine | December 2018

How innovation can shape the payment card market of the future

SEBASTIEN CLAMAGIRAND, NXP BLOG

Where is the payment card industry heading? With more than three billion shipments per annum the payment card market continues to grow globally. Aside to this growth, it is also undergoing significant changes with a strong migration from EMV contact cards to EMV dual interface cards (especially in US, Latin America, Southeast Asia and India). Additionally, magnetic stripe cards are disappearing and only represent a small portion of the overall market today. Card usage is also expanding strongly with over 500 billion transactions in 2017 and consistent year on year growth of 10% since 2010. A changing payment card market has brought big challenges for the industry: In the last three years the price for both contact and dual interface cards has dropped by two thirds. The now standardized, partly commoditized payment smart card has put pressure on the entire ecosystem and leaves ecosystem players looking for ways to

bring innovation and value back to the card. The battle to capture the transaction Considering these challenges and the reality that other form factors like mobile continue to grow in the market, it is legitimate to ask whether the payment card is still a vehicle for innovation, or whether it will be replaced by more convenient ways to pay? When answering this question, one needs to understand that new form factors such as mobile payment are not necessarily cannibalizing, but complementary. Meaning as card and mobile payment become the dominant way to pay, the question is rather: Is there a future for cash? The real battle is not between different form factors, where the transaction is authenticated with a secure element, the real battle is taking place with cash and other insecure ways to pay,

such as QR code. For this reason, several governments have launched initiatives for their own national payment standard, for example RuPay in India, NSICCS in Indonesia or VCCS in Vietnam. The Indian government has the stated aim of demonetization. To reach this goal, it has already triggered the issuance of hundreds of millions of RuPay bank cards and introduced a mobile application to complement this. India has now reached over one billion cards in circulation, coming from under 400M pieces in 2014. Bringing innovation to the payment card Although new form factors have emerged, the payment card can still be an object for innovation. One key opportunity is bringing multiple use cases to a single card and making transaction authentication even more flexible, faster and more secure. The convergence of applications is a

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