Report Says Security Boosts Payment Cards Market

Sep 2, 2008 3:20 PM

With card companies offering benefits such as redeemable rewards points and cash-back offers, customers are being lured into using their cards for payment of various products and services. Apart from replacing the cumbersome and often risky paper-based transaction system, electronic payments have boosted business prospects of organizations worldwide according to the report titled "Payment Cards: A Global Outlook," published by Global Industry Analysts Inc.

By using electronic systems, business organizations and customers are now able to conduct safe and hassle-free transactions. With the rapid expansion of point-of-sale (POS) networks and online markets, electronic payment systems are becoming accessible to increased number of wholesale and retail outlets across the world. Growing adoption of payment cards has also led to a decline in the direct and indirect costs associated with plastic payment cards.

Contactless technology is expected to be a major driving force in the global payment cards market. As compared to conventional magnetic stripe cards, contactless payment cards offer improved security, ensure faster transaction, and eliminate the need for user authentication measures such as signatures. Reduction in the cost of development of contactless technology-based cards is expected to drive up the market for contactless debit cards and RFID smart cards. However, the absence of a large user base for such cards prevents merchants/businesses/retailers from adapting their POS systems to the technology.

With Internet emerging as a major medium for purchase of goods and services, debit and credit cards are being widely used. Credit cards is a relatively mature market and presently faces testing times with consumers shifting towards debit cards. However, credit card usage in countries such as the United States, UK and France is anticipated to grow.

Debit card transactions across the world are growing rapidly, driven by consumer shift from credit cards to debit and prepaid cards. Government agencies are also using debit cards to make payments for medical and health insurance reimbursements. Debit cards offer attractive prospects for financial institutions, which are evolving new strategies to ensure their higher uptake among consumers.

Smart cards are being promoted as the future of secure payment transactions. Incorporating a microprocessor chip, smart cards are considered ideal for user identification and authentication. Smart cards find use in ID programs, network security and transportation sectors. With growing number of consumers holding smart cards, local merchants are expected to upgrade their POS terminals for acceptance of these cards. This would subsequently promote conversion of magnetic stripe-based credit and debit cards to chip-based smart technology.

Card fraud is a major concern facing the payment cards industry. Card fraud, identity theft and card skimming are some of the challenges faced by this industry. However, the development of advanced technologies such as RFID, and biometric authentication are expected to facilitate card issuers to effectively deal with card fraud.

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© 2009 Penton Media Inc.

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