Contactless Smart Card Market Expected to Weather the Storm Caused by Economic Uncertainties

With Asia Pacific being a highly diverse geographic region with dissimilar market conditions, participants in the contactless smart card market should be prepared for varied reactions to the economic downturn. While countries that have not yet achieved mass deployment of contactless smart cards could experience further delays, more advanced countries such as Japan and South Korea that possess strong contactless infrastructure and high penetration rates are unlikely to slow down drastically.

In fact, some countries continued to expand and new projects, particularly in mobile payments, flourished in 2008 despite the turbulent economic environment.

New analysis from Frost & Sullivan finds that the market earned revenues of $769.4 million in 2008 and estimates this to reach $1356.0 million in 2014.

Ongoing issuance of projects such as e-passport and mass transit ticketing will continue and applications will expand to include contactless and mobile payments. Some other contactless applications that will insulate the market from the downturn are upgrades and replacement cards.

Despite this positive outlook, market participants must be prepared for a lower volume and revenue growth rate, as some new projects and expansion programs could be delayed or shelved.

"Applications that may suffer are perhaps new projects in entertainment, tourism, travel, or access control - especially when there are cheaper alternatives and converting to smart cards may not be a priority at this point in time," says Frost & Sullivan Industry Analyst Michelle Foong. "For instance, contactless payments may not be popular in countries that are just starting to expand or launch various projects."

To ride out this unstable phase, market participants should promote their products' ability to create a more efficient and cost-saving system in the long term, be it in the mass transit, government, or other industry. This benefit will be even more apparent if there are multiple applications. At a time when participants need to restrain spending, vendors should revisit successful business cases and emphasize the long term cost savings and efficiency that resulted from them.

"Currently, there are many well-established projects in the region such as Ez-Link in Singapore, T-Money in South Korea, and EasyCard in Taiwan," notes Foong. "Similarly, with e-passports, there are spillover benefits through learning, wherein a country adopts e-passports and later considers using the same platform for its national IDs or driving license cards."

Posted to the site on 12th April 2009