Contactless payment cards to account for 50% of all cards in 2018

Contactless payment card issuance is set to hit 1.5 billion units in 2018, accounting for over 50% of all payment card shipments delivered globally, according to analyst firm ABI Research.

Breaking the 50% barrier marks a significant milestone in contactless card migration, where market momentum is expected to continue due to next-generation migration opportunities, most notably in the US, India, South East Asia, and Latin America. These opportunities are helping to push contactless card issuance volumes toward 2.3 billion annually by 2022.

The buzz in contactless migration and market expectations has been further heightened thanks to the contactless migration mandates put in place in Latin America and South East Asia.

With short deadlines set by Visa and MasterCard coming into effect in October 2018 for POS terminals and April 2019 for new card issuance respectively, all eyes are pinned toward these two regions as significant growth areas for the contactless payment card interface.

“All the indicators are positive for a significant level of contactless migration into these two regions and although demand is yet to materialize, activity and heightened interest from issuers in countries including India, Thailand, Colombia, and the Philippines will likely result in an increase of contactless issuance as early as Q4 2018,” commented Phil Sealy, principal analyst at ABI Research.

“However, South East Asia is looking more positive than Latin America. It is understood that larger issuers in Latin America are looking to postpone the mandate (particularly in Brazil), driven by price and a lack of readiness.”

Furthermore, ASP (average selling price) degradation will continue to play a significant role in issuer interface choice. Continued ASP reductions will only increase contactless appetite among issuers, particularly as the price gap between contact and contactless narrows.

However, contactless enablement and migration programs are only one aspect of driving the payment cards market toward higher value card propositions. The next-generation of technologies and materials are already making their market presence known.

“Differentiation is playing a key role in issuer strategies, in a bid to not only differentiate from the traditional competition, but also as a means of combating Neo/challenger banks. The leading smart card vendors, including Gemalto and IDEMIA, have primed their respective payment card product portfolios to take advantage of a card market which is transforming from one of delivering secure payment authentication, toward new functionality and personalized experiences to stand out from the crowd, create new levels of brand stickiness, and ultimately broaden card portfolios via new form-factors, including metal cards and next-generation powered payment cards with biometric and display enabled form-factors,” Sealy explained

“Contactless used to be one of the ways to differentiate, but as contactless payment cards become the de-facto interface of choice, banks and financial institutions will increasingly turn toward next-generation technologies, materials, and personalized services in order to execute differentiation strategies,” he concluded.

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