Total Card-Reader Market To Reach $2.36 Billion By Year 2003

A common dilemma for many VARs is choosing a technology to market. Often VARs ask: How big is the market for this product? Is the market growing? How long can I reasonably expect sales of this product to last? Well, the answers are: the market for magnetic stripe readers is big; it's growing; and it's going to be around for a long time. What more could you ask for?

According to Kiran Gandhi, vice president of marketing for Mag-Tek, Inc., a leading vendor of card-reading, check-reading, card-issuing, and card-holder-verification products. mag stripe is a mature industry. "We see its use everyday in areas such as banking (ATMs/debit cards), credit cards, loyalty cards in the retail sector, and in mass transit," he said. "It is a technology that is here to stay for a long time."

Smart Cards Still Far Away
He continues, "I am sure that smart cards will eventually become a viable technology that is widely used. However, it will be a while before this happens. In the meantime, vendors in the mag stripe industry must help develop a migration path to smart cards (commonly referred to as chip cards). First, we are likely to see the development of a hybrid card which is a combination of mag stripe and silicon chip technologies. Then, at some point, smart cards will prevail. But, mag stripe technology will be around for at least another 15 to 20 years."

Gandhi based his prediction on the fact that mag stripe technology is firmly entrenched. One only need consider how many ATM machines are in use, not to mention the debit, credit, or loyalty card readers in place in the retail sector. These machines will not be replaced overnight.

Verticals For Mag Stripe Readers
Jay Huapaya is president of CipherLab USA, a manufacturer of magnetic/slot readers, decoders, CCD scanners and programmable terminals. Huapaya said there are five major markets for mag stripe readers (financial/banking; retail; healthcare and insurance; access control/identification; and services/hospitality). Huapaya explained the various markets. "In the banking industry, ATMs have become extremely popular. In retail, loyalty cards and credit/debit cards are now common."

"In the healthcare/medical industry, mag stripe technology can be used for patient registration, prescription cards and HMO identification. The identification market is for issues of access control and security. And, in the service industry, mag stripe cards can be used as courtesy cards in hotels and casinos."

Technology Improves The Durability Of The Mag Stripe
Some users of mag stripe technology have complained that the cards are easily erased, often by accident. Gandhi says that a new technology called "Hi-Co" makes it more difficult to accidentally erase a mag stripe card. And, Hi-Co does not require a new reader. It can be read by any standard mag stripe reader. Some of the larger companies in the mag stripe industry are also working on tamper-resistant cards.

The financial industry is probably the largest market for mag stripe technology but the transportation and retail industries are not far behind, according to Gandhi. Although it was not in the list mentioned by Huapaya, Gandhi said that Mag-Tek does a tremendous amount of its overall business with the transportation/mass transit industry. CipherLab focuses mainly on the retail industry. The point is, there's a lot of business out there for VARs and integrators looking to take on a new technology.