High technology costs and lack of standards are scaring the financial services sector off smartcards, according to a new report.
The cost of smartcards, compared to basic magnetic cards, could be "an almost insurmountable obstruction" to uptake for some applications, according to the report author Datamonitor.
Despite this, the global smartcard industry will be worth $2.3 billion a year by 2002, with 1.2 billion cards in circulation - double today?s rate - predicts London based consultancy Datamonitor.
But the critical financial services sector is wary, deterred by the high costs. While basic memory cards cost just 50 cents, new no-touch cards, which can be scanned without being removed from a wallet, cost an average of $20 in 1997.
Standards is also hindering even higher growth rates. The absence of a globally recognised operating system for the new generation cards is thought ?sufficiently confusing to create doubt in many national markets", according to Datamonitor. Banks, for example, are unsure whether to adopt the Javacard specification or Barclaycard-backed rival Multos.
But a spokeswoman for Gemplus, one of Europe?s largest smartcard manufacturers, said that prices for no-touch cards will fall after banks finish trialing them.
She added that smartcards are not just designed for multinationals. ?We have loyalty card schemes aimed specifically at smaller businesses, so if a hairdresser wants to reward his customers he can," she said.
Mark Stevenson, an analyst at Ovum, said the battle to produce an operating system standard is almost over. ?The Java cash card operating system is at least a year off interoperability, unlike the Multos system which is cheaper and shipping now," he said.
However, he added that: ?Smartcards are still pretty dumb compared to any other PC part.?
The telecomms sector is the dominant user of smartcards with a 60 per cent share of the cash card market, followed by the health sector with 20 per cent and the financial sector with eight per cent.
The report says growth in Europe?s smartcard consumption will fall from 75 per cent in 1997 to 47 per cent in 2002, compared to 100 per cent growth in the US. For the Asia/Pacific region - the second largest market - the projected growth rate is only 10 per cent.
Two other trends to watch out for, according to the report, will be the rise of multi-functional and retail loyalty smartcards.
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