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Table of Contents
Chapter One: Background and Objectives of this Report...............................................1 Page | i 1.1 Background to this Report ..................................................................................1 1.2 Objectives and Scope of this Report....................................................................1 Chapter Two: Powered Smart Card Technologies and Products ....................................2 2.1 Powered Smart Cards: Competitive Advantages and Disadvantages Compared to Other Smart Cards ...................................................................................................2
2.1.1 Comparison with Conventional Smart Cards ................................................................................. 2 2.1.2 Advantages of Powered Smart Cards ............................................................................................ 2
2.5 Key Points from this Chapter ............................................................................ 14 Chapter Three: Powered Smart Card Markets and Forecasts ...................................... 16 3.1 Forecasting Methodology ................................................................................. 16
3.1.1 General Methodology .................................................................................................................. 16 3.1.2 Data Sources ................................................................................................................................ 16 3.1.3 Scope of the Forecast .................................................................................................................. 17 3.1.4 Assumptions ................................................................................................................................ 18 3.1.5 Alternative Scenarios ................................................................................................................... 19
3.2.1 Powered Smart Card Shipment Forecast ..................................................................................... 20 3.2.2 Powered Smart Card Shipment Revenue Forecast by Application .............................................. 23 3.2.3 Powered Smart Card Shipment and Revenue Forecast by Region of Use .................................. 26 3.2.4 Forecast of Batteries for Powered Smart Cards .......................................................................... 28 3.2.5 Forecast of Displays for Powered Smart Cards ............................................................................ 38
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List of Exhibits
Exhibit 2-1: Advantages and Disadvantages of Powered Smart Cards ......................................... 3 Exhibit 2-2: Overview of Selected Powered Smart Card Providers ............................................... 7 Exhibit 3-1: Analysis of Smart Card Market 2012-2019 ............................................................ 22 Exhibit 3-2: Powered Smart Cards by Application 2012-2019 ................................................... 24 Exhibit 3-3: Powered Smart Cards by Region 2012-2019 ......................................................... 27 Exhibit 3-4: Printed Batteries in Powered Smart Cards 2012-2019 ............................................ 29 Exhibit 3-5: Thin-Film Batteries in Powered Smart Cards 2012-2019 ......................................... 32 Exhibit 3-6: Summary of Volume of Batteries in Powered Smart Cards 2012-2019 (Millions) ...... 34 Exhibit 3-7: Summary of Market Value of Batteries in Powered Smart Cards 2012-2019 ($ Millions) .................................................................................................................................... 36 Exhibit 3-8: Analysis of Addressable Market for Displays in Powered Smart Cards 2012-2019 ..... 39 Exhibit 3-9: Electrophoretic and Related Displays in Powered Smart Cards 2012-2019 ............... 40 Exhibit 3-10: Electrochromic Displays in Powered Smart Cards 2012-2019 ................................ 43 Exhibit 3-11: Liquid Crystal Displays in Powered Smart Cards 2012-2019 .................................. 46 Exhibit 3-12: Light-Emitting Diode Displays in Powered Smart Cards 2012-2019 ....................... 49 Exhibit 3-13: Summary of Quantity of Displays in Powered Smart Cards 2012-2019 (Millions) .... 52 Exhibit 3-14: Summary of Market Value of Displays in Powered Smart Cards 2012-2019 ($ Millions) ....................................................................................................................... 53
Importantly, in both cases, the card reader supplies all of the necessary power. In the case of contact cards, the reader's power source is harnessed through direct contact. In contactless smart cards, an inductor captures some of the incident RF interrogation signal, rectifies it, and uses it to power the card's electronics.
In non-powered smart cards, these hazards are addressed by using special designs. For example, a novel multi-core smart card design, which improves the operational stability of some smart cards in use today, has been designed at the Graz University of Technology in Austria. The researchers there say that their tests show that harmful power variations can be reduced by up to 75 percent and predefined supply voltage levels are maintained properly. However, the addition of onboard power in the form of a battery enables smart cards to include a lot more functionality, and would simplify design issues for contactless smart cards. The power-draining features that the industry would like to add to smart cards are, in some cases, not yet well defined, but the product designs that are currently being considered include adding simple displays, sensors, and sound. Several companiesmost notably Bank of America, PayPal/e-Bay, and some Visa issuers in Europealready have powered smart cards in circulation, primarily for enhanced payment security through one-time password (OTP) generation. The advantages/disadvantages that powered cards present over conventional cards are shown in Exhibit 2-1. In all cases, the technical advantages of adding functionality are at least partially overshadowed by the fact that adding these features greatly increases the cost of the card. Thus, benefits of the added functionality must be carefully weighed against the added cost in each application considered for a powered smart card. Page | 3
Integrated sound
Onboard power to reduce overall costseventually: The addition of power to smart cards simplifies things for the circuit designer and may ultimately lead to a reduced cost for the card. However, in the near term, the cost of the added battery is simply too high, and the cost of migrating standards and read/write protocols to adapt to a new, powered smart card is significant. Nevertheless, we believe that, in the long run, the ability of smart cards to contain inexpensive, easily integratable onboard power sources may eventually lead to reduced overall costs for smart cards.
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An OTP is a password that is valid for only one login session or transaction. They avoid a number of shortcomings that are associated with conventionalthat is, permanentpasswords. The most important shortcoming that is addressed by OTPs is that, in contrast to conventional password systems, they are not vulnerable to so-called replay attacks, precisely because the passwords are used only once. With an OTP card, the cardholder presses a button on the card to display the one-time password, which is generated by an algorithm programmed into the card. OTPs can be implemented in ways other than embedded in the cards. In the EuropayMasterCard-Visa (EMV) "Chip Authentication Program," for example, a reader is used. In the context of smart cards, though, OTPs must be displayed. This additional display functionality drives the need for onboard power with an integrated battery, as well as, of course, the required circuitry for computing the algorithm. The consensus is that a conventional reader-powered smart card cannot accomplish these tasks.
OTP generation may be part of the picture, such as to increase the security of gift cards. However, the application goes well beyond security: The display could be used to provide a remaining balance notification at the touch of a button; security could be enhanced by adding a simple keypad for PIN entry prior to displaying the balance. Page | 5 The display could be used to deliver marketing messages of various kinds, or as a decorative addition to a gift card. Addition of miniature, integrated speakers could enable the above displays to come with sound, too. Finally, onboard power in a smart card could be used to enable the fabrication of sophisticated gift/loyalty cards with multiple, interactive features, such as games with a display and sound, etc.
For the biometric cards, the driver is obviously today's heightened sense of the need for security; but this type of card is expensive today, and is not likely to generate the volumes associated with a relatively simple OTP credit card in the near- and mid-term. One firm that is developing biometrically-activated cards with onboard power is Danish firm CardLab. Note that a three-factor authentication protocol, which is something like the ultimate in powered Page | 6 smart card technology, would include both an OTP generator and a biometric sensor.
2.3 An Overview of Some Current Powered Smart Card Products 2.3.1 E-Bay/PayPal Security Key
One of the most prominent proponents of OTP technology is PayPal, which is now owned by eBay. Both PayPal and eBay were early innovators in the implementation of secure methods for consumers to submit payment information for online purchases, where concerns over fraud, identify theft, and data phishing are high. Thus, it is not surprising that PayPal was one of the earliest firms to offer OTP technology to customers in the U.S., Canada, Australia, and several European countries (the U.K., Germany, and Austria). It established a security card (and an alternative security token/fob) OTP option in 2006. However, today, PayPal customers that want to take advantage of OTP technology have two options; as of August 2012, they may sign up for a free service that sends OTPs to their mobile phone via text-messaging, or they may continue to use the smart OTP card, for which they must pay a one-time fee ($29.95 in the U.S.). In other words, PayPal customers now have a totally free option that allows access to the same basic function as the fee-based OTP card that has been around since 2006. Given the ubiquity of mobile phones and text messaging in general, we expect that the free, mobile option will quickly take over, leading to obsolescence of smart OTP cards within PayPal.
Similarly, Citibank offers OTP service in some countries, but only via text messaging. To the best of our knowledge, no OTP card option is available, although Citibank did release a smart card in 2011 that allows customers to push a button on the card to toggle between payment methods (credit or rewards points). In general, both Visa and Mastercard offer OTP services globally, through their Verified Page | 7 by Visa and SecureCode systems, respectively. Card-issuers can choose to participate and most prominent banks have chosen to participateby offering these services to their customers, but they need not be accompanied by issuing a physical OTP-generating card.
The lack of widespread adoption of OTP smart cards thus far is a result of two factors. First, the spread of smartphones has in some cases rendered these cards obsolete, especially for more sophisticated consumers. Secondly, the fact that issuers continue to charge customers for the added OTP service has also limited adoption. Going forward, as powered smart card costs come down, issuers may be better able to absorb the added cost without passing along the cost directly to the consumer. When that happens, the technology may have a better chance of penetrating the larger smart card market more deeply.
dz card (Thailand)
Early pioneer of the OTP card business, now offering powered smart cards to banking, ID, and government sectors; has employed Aveso electrochromic displays in its products
Partnered with Visa to offer card to issuing partner banks, especially in Europe Acquired Aveso (maker of electrochromic displays) in late 2011/early 2012.
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Nagra ID (Switzerland)
SmartDisplayer (Taiwan)
Powered smart cards with integrated displays for OTP and other applications (dynamic CVV, balance/value check, etc.) OTP cards plus a full range of advanced security products, including tokens & fobs, and software
Works with Master Card and a group of EMV-certified partner companies working in the banking, healthcare, and ID sectors. Firm has had several early design wins in the powered smart card industry. Offers cards with either LCDs or electrophoretic displays; key partner for electrophoretic displays is E Ink (U.S.); certified by Visa Particularly active in the banking industry in Southeast Asia
NanoMarkets 2012
Economies of scale will slowly but surely be realized, and component prices will come down. In addition, more and more components will move toward printed and/or solution-processed technologies that are inherently compatible with card manufacturing. The "ultimate" powered smart card will be one that has a printed battery, but also a printed display (probably based on epaper), as well as, potentially, printed low-cost logic and even memory components.
2.4.1 Thin-Film and Printed Batteries for Powered Smart CardsImportant Factors
The obvious choice for replacement of too-thick button cell batteries in smart cards would be to use one of the new breed of thin-film and/or printed batteries that are currently being developed by a small group of companies. Among the firms in this group that are specifically targeting the smart card sector are Infinite Power Solutions (U.S.), Blue Spark (U.S.), Rocket Electric (Korea), and Solicore (U.S.). Solicore is the most important of these firms in terms of actually gaining some marketplace traction. In the face of competition from conventional smart cards and from mobile (card-free) OTP solutions, smart cards are not growing as an opportunity for printed and thin-film battery firms at the rate that was once hoped. Nevertheless, powered smart cards remain an important short-term opportunity for these types of batteries, because they offer a unique combination of characteristicsthinness, flexibility, and (potentially) low cost and compatibility with credit-card manufacturing processes. In contrast, conventional battery technologies, with their thick form factors and liquid electrolytes, are simply not ideal for integration into plastic cards. Thinness and flexibility of printed and thin-film batteries: Thinness and flexibility in the smart card sector is obviously critical, because these cards must be thin enough to slip easily into a wallet. For example, we note that printed battery manufacturer Blue Spark's UT Series is being pitched toward the smart card market on the grounds that it is the industry's thinnest battery500 microns (0.020 inches). Market impact of smart card lamination requirements: Smart cards are generally manufactured using a hot lamination process, which can last as long as 12 minutes. Conventional batteries, such as coin or button cellseven assuming that they were thin enough to be usedcontain liquid electrolytes that would not survive such high temperatures, especially in a charged state. Furthermore, there are additional safety concerns related to using conventional batteries because of potential gas or liquid release. However, we note that hot lamination is also a problem for the current generation of printed batteries from Blue Spark and others, which often use liquid electrolytes and are thus relegated to use only in cold lamination processes. Thus, an immediate opportunity for printed battery suppliers is to develop and market versions with solid-state electrolytes that can be deposited during manufacturing as a paste and then dried. This approach has been adopted by Solicore, which, as we noted previously, is the dominant supplier of batteries to the powered smart card business. Thin-film versus printed batteries in smart cards: The most obvious contenders for powered smart card applications are printed batteries, since smart cards represent a highly price-sensitive application. Lost cost, primary cell, printed batteries are a particularly good fit for a mass-market credit card that is produced in high volumes and has a low power requirement.
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