Market Insight

What to watch for in the digital security market in 2017

January 17, 2017

Don Tait Don Tait Principal Analyst, Cybersecurity & Digital ID

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As people slowly get back from their seasonal break and drag themselves in 2017, what is likely to happen in the digital security market over the coming year? IHS Markit predicts the key themes driving various digital security sectors in 2017.

Top Trends for 2017

  • India’s decision to scrap all 500 and 1000 rupee notes in November 2016 will transform the digital payments landscape within the country.
  • The embedded SIM (eSIM) market will develop further in 2017 with the launch of the eSIM in cellular handsets. The eSIM will also become more common in areas such as M2M, wearables and consumer electronic devices.
  • The terror attacks in Nice, Berlin and Istanbul will bring eID credentials, border controls and the Schengen Agreement into sharper focus. 
  • The IOT space will prove to be a hot bed of innovation over the next twelve months. NFC will play a pivotal role in connecting these IOT devices.

Analysis for 2017

India scrapping 1000 and 500 Rupee notes transforming digital payments

  • India’s decision to scrap all 500 and 1000 rupee notes in November 2016 will transform digital payments there. IHS Markit believes that this decision will dramatically increase the size of the mobile payments market. The move was designed to curb endemic corruption. But it also had the effect of accelerating India's transition to digital payments, and the mobile wallet market is expected to explode to 300 billion rupees ($4.5 billion) by 2022 from 1.5 billion rupees in 2016. Companies such as Paytm, Oxigen, MobiKwik and PayUMoney are well placed to take advantage of this decision. It will also increase the number of smart and secure EMV credit and debit cards in circulation and accelerate India’s transition to digital payments.  

Embedded SIM becoming more mainstream

  • The embedded SIM (eSIM) market will develop further in 2017 with the launch of the eSIM in cellular handsets. In 2017, growth of SIM card shipments is projected to slow. The SIM card market is relatively saturated and the introduction of eSIM cards will slow this market further. On the plus side, companion devices such as smart watches, which incorporate an embedded SIM card, are projected to benefit SIM card shipments over the next few years. There are also other markets such as automotive, consumer electronics, M2M and IoT that can benefit from an eSIM, where its use will become more common.
  • The eSIM can have benefits for different stakeholders of the ecosystem. For consumers it can lead to lower costs of connected products, an increase in the number of connected devices and an improved customer experience and greater flexibility. For MNO’s the eSIM can lead to new market opportunities in areas such as M2M, IoT and the connected car. It can also lead to the reduction in SIM handling, integration and handling costs. For SIM card suppliers, there is also the opportunity to enter new markets such as IoT, M2M and the connected car. It can also reduce physical reduction costs.

Electronic identity (eID) credentials on the increase?

  • The terror attacks in Nice, Berlin and Istanbul in 2016 have brought eID credentials, border controls and the Schengen Agreement into sharper focus. The Schengen area is composed of 26 European countries with a common visa policy that have officially abolished passport and other types of border control for international travel within the area. Some people have questioned whether or not Schengen in now fit for purpose or relevant to today’s circumstances:
    • Does the Schengen area need to tighten its border controls or even be scrapped?
    • Do individual countries within the Schengen area need to strengthen their border controls?
    • Do governments need to issue more secure eID credentials to their citizens?
  • IHS Markit believes that the Schengen agreement will not be scrapped in 2017. The free movement of goods and people is one of the core values of the European Union. However, it does need to evolve. The ongoing migration crisis and terror attacks have resulted in some countries such as Austria, Denmark, Norway, Poland and Sweden imposing temporary controls on some or all their borders with other Schengen countries. The included the re-introduction of showing passports and border checks.
  • IHS Markit believes that individual countries may unilaterally impose border controls on other Schengen countries in 2017. This could lead to an increase in demand for border control equipment and more secure eID credentials. This would require government budgets to increase in order to absorb the costs of these higher security measures. Also, there has already been strengthening of the outer borders of the Schengen area in countries such as Greece.

IOT devices will be a hot bed of innovation  

  • The internet of things (IoT) will prove to be a hotbed of innovation over the next twelve months. IHS Markit believes that Near Field Communication (NFC) will play a pivotal role in connecting the installed base of 31 billion IOT devices that are projected to be in use by 2020.
  • The connectivity of the IoT will enable the seamless communication among devices. NFC can be used to help developers utilise internet-enabled devices in an effort to maximize the benefits of the IoT in daily life.
  • NFC provides a simply solution for connecting IoT devices to a network. Any device that is lacking a quality user interface (UI) can be given user-friendly controls with a single tap via NFC. In addition to its ease of use, other benefits include explicit interaction through close proximity interactions, read and write capabilities and communication with devices that are powered down. NFC is a low cost and low energy solution that will enhance the IoT experience.

 

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