Smart Card Shipments to Pass 1 Billion Mark in 2014, Says IMS Research

While often talked about as a future technology, contactless smart cards are being used in a growing number of applications, from fast and efficient metro systems, to contactless debit cards, to quicker transfers in airports with biometric passports. IMS Research's new report entitled "Smart Cards and Smart Card ICs" forecasts that the number of contactless smart cards shipping per annum is projected to break the 1 billion mark in 2014.

"The market for contactless is set to nearly double between 2008 and 2014 as the three largest end-user sectors, government and health care ID, transportation and payment and banking cards, all see contactless gain more traction," said Don Tait, Report Analyst.

The government and health care sector is the largest contactless application for smart cards, having been traditionally driven by shipments of contactless memory cards into China's national ID program. However, IMS Research expects in the future it will comprise of a growing number of smaller schemes employing microcontroller-based cards, such as driver's licenses, health care, national ID and e-passports in many different countries.

In the transportation sector, ease and speed of use with minimal human intervention and enhanced security features are key market drivers to the adoption of contactless smart cards. Contactless is able to increase traveler throughput and (prepaid) electronic ticketing, parking payment and toll collection are prime examples where it is increasingly used to deliver better service and an improved customer experience.

Despite few shipments to date compared to ID and transportation, payment and banking is set to be the fastest growing area for contactless. With card issuers and banks pushing contactless in key markets, consumer awareness and acceptance of contactless smart cards is now growing. More retailers have successfully tested contactless and the convenience offered of making payments in this manner has been highlighted. The increasing rollout of contactless payment terminals at PoS will increase the adoption of contactless payments as it offers fast and convenient transactions.

However, it is not always a smooth ride for contactless adoption. "One key area that has yet to fully adopt contactless is mobile. Much has been done to promote and implement contactless SIM cards with near field communications (NFC) but there remain issues to be addressed, which will take time to resolve. One is the lack of a common certification standard which ensures out of the box compliance for the different pieces of the NFC puzzle. Another, and perhaps the most important, is the lack of a progressive and universal business agreement between the various stakeholders as to how to best implement a mobile-NFC payment eco-system," said John Devlin, Research Director.

Progress is being made though, with Nokia and significant others such as MasterCard and Visa backing NFC, along with ongoing trials of the technology in "open environments." Despite this, IMS Research is not forecasting major contactless shipments in mobile until 2012.

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