The advent of contactless personal computer/smartcard (PC/SC) reader technology marks a significant development for the smartcard market in general and the access control segment in particular. Manufacturers are increasingly launching PC readers with contactless functionality.
Analysis from Frost & Sullivan (www.smartcards.frost.com), World Smart Card Readers & Terminals Markets, reveals that the total smartcard reader market totalled 9,4 million units in 2003 and projects to reach 35,5 million units in 2008. The total smartcard terminals market totalled 4,8 million units in 2003 and projects to reach 14,3 million units in 2008.
Bureaucratic delays that are often associated with large government projects such as national ID, driving licence or health cards are likely to adversely affect the market for smartcard readers.
"Lack of government proactiveness is delaying potential roll-outs of national ID project," notes Frost & Sullivan research analyst Karthik Nagarajan. "In spite of successful pilots in many Asian and European countries, governments are delaying their decision for actual roll-outs, mainly due to bureaucracy and cost apprehension."
Potential changes in government also bring in the added threat of delaying proposed projects for political reasons. This trend is particularly evident in some of the developing Asian nations.
Card issuers are also challenged by the need for a standardised technology for government projects. Following the International Civil Aviation Organization's (ICAO) recommendations to move toward smartcard-enabled e-passports, several countries, including the United States, are testing various technologies for compatibility with ICAO's specifications.
When launched, this is likely to be the largest smartcard project in the United States and will involve embedding contactless chips into passports that reader terminals will access at the airport.
The tests being conducted are not without their share of difficulties. Recent tests faced problems due to government regulations on encryption.
Since the project is currently in a phase where interoperability is being evaluated, these problems are likely to be overcome. However, the standardisation requirement - owing to the critical nature of such projects - will continue to pose a strong challenge to manufacturers and government agencies alike.
In the banking segment, terminal manufacturers face the task of creating a convincing business case for smartcard payments. Especially the case of North America where the advantages of chip cards are not as attractive as they are in Europe and Asia.
"Though contactless payment has gained popularity in North America, it is far from being a significant driver for large-scale migration of banking cards," remarks Nagarajan. "Hence, finding an alternative and more compelling value proposition for consumers continues to be an important challenge for the terminals market."
Despite these challenges, the smartcard readers and terminals market is expected to benefit from Europay, MasterCard, Visa (EMV) migrations in the banking sector across the world. Looming EMV deadlines ranging from early 2005 up to 2006 for various countries will present significant opportunities for the readers/terminals market and help it achieve strong growth.
Reference: Frost & Sullivan, www.frost.com
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