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news

Card Technology Today July/August 2001

market forecasts

Micro-processor cards toovertake memory cards Shipments of micro-processor cards willhave overtaken shipments of memory cardsby the year 2005, according to the latestforecasts from Eurosmart, the smart cardindustry’s leading trade association (seeTable).

Lutz Martiny, chairman of Eurosmart, said that the annual rate of growth across thewhole smart card market over the five yearperiod is likely to be in the region of 20% involume terms.

Initially, the shift from memory cards to (high value) micro-processor cards, promisesincreased revenues. But as volumes of micro-processor cards build up, prices of these too willbegin to come down, warned Martiny.

Factors behind the increased volumesforecasts include:

• a continuing roll-out of EMV cards in thebanking sector;

• a growth in (mobile) telecoms in newmarkets;

• the introduction of chip-based mass transittickets;

• the introduction of card-based ID forInternet transactions;

• the introduction of card-based ID for e-government.

Since 1997, pointed out Martiny, the totalworldwide market has grown from 900 millioncards to an estimated 2015 million in 2001; inother words the industry’s shipments have morethan doubled in five years.

The year 2000 itself was relativelydisappointing in volume terms; total shipmentsof 1,603 million cards showed overall growth ofonly 12% over the previous year. This was dueto a slow down in the growth of memory card

markets and ‘moderate’ shipments in emergingsectors, such as health, transport and ID.

However, the overall micro-processor cardmarket grew by 36% in 2000, fuelled by an 85%growth in the wireless telecoms market.

As far as the geographic breakdown goes,Europe still takes 90% of all smart cardsdelivered. Eurosmart reports rapid growth in theCentral and Southern American markets,mainly for pre-paid phone cards and in China,for GSM mobile phone cards.CCoonnttaacctt:: Lutz Martiny at Eurosmart,Tel: +32 2 506 88 68, email: lmartiny@eurosmart.com

Sector Memory Memory M/p M/p 2001 2005 2001 2005

Banking - - 140 540

Health care 20 40 30 120

Telecom 1150 1500 500 1250

Mass transit 20 170 12 40

Pay TV - - 30 80

Internet ID - - 15 150

Loyalty 18 40 15 60

Govt ID - 50 - 150

Others 40 - 25 70

Total 1248 1800 767 2460

Source: Eurosmart

Table: How the chip card market will grow (million units)

Not aspirins but ViagraJava Card technology looks set to lead the drive towards smartcard issuance in the US.

In the financial arena, the Smart Visa programme now incorpo-rates three-dollar Java cards from several of the major card pro-ducers (See Briefs, p.5). The same producers are developing cardmanagement systems to handle the post-issuance downloading ofdifferent applications.

The US Department of Defense is using Java Card technologyin its current rollout of ID cards for members of the military andtheir support staff.

In addition, the US wireless phone industry is beginning toswitch towards GSM technology. Java Card-based SIM cards looklike being the best means of downloading, updating and deletinga whole range of non-voice services.

The moral is that smart cards are not going to sweep into theUS market because they provide protection against credit cardfraud. (Indeed, the US banks don’t want to admit that their pre-sent card payment systems are prone to fraud.) But smart cards,Java Cards in particular, are going to be issued because of theadded services that they can provide. In the US, smart cards arenot going to be aspirins that cure minor ills, but the Viagra tabletsthat promise potency.

The business case gets strongerThe business case for replacing magnetic stripe payment cards with chip cards is getting stronger. This is certainly the case in Europe where, by contrast with the US, the banks still think that the case has to be built around fraud prevention.

“87% of card fraud occurs in five countries – UK, France, Italy,Spain and Germany,” Peter Warner, director of corporate securityat Europay, told Ctt.

“Each [magnetic stripe] card issued, costs banks on averagesome E3 a year; since cards are replaced every two years, thismeans that one card loses E6 in its lifetime.”

“Now 70% of card fraud is perpetrated on lost, stolen or coun-terfeit magnetic stripe cards. All these causes of fraud could bechecked by use of chip cards with a PIN. Therefore there is anopportunity to spend something like E4 a card on adding chipand a PIN for every card – and thus eliminate 70% of fraud.

“With the euro and dollar roughly at one-to-one parity andthe card manufacturers promising to supply three dollar cards,the business case for the smart EMV [debit/credit] card at lastlooks a serious proposition.”

David Jones

Viewpoint

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