In its flagship security print report for 2015 – The Future of Global Security Printing Markets to 2020 – Smithers Pira’s data shows a steady increase of 5.9% across the study period, 2015–2020. This is slightly less than the first half of the decade, but still presents significant opportunities as a world market valued at $20.5 billion (€18.7 billion) in 2010 will reach $36.6 billion in 2020.
This expansion is occurring at a time when the global print market itself is undergoing a series of profound changes. Two-thirds of the growth through to 2020 can be attributed to two end-use markets.
- For banknotes – the largest end-use segment at just under 40% of world market share – a declining rate of growth in terms of volume is being compensated for through higher prices charged for durable banknotes and premium security features;
- For the tax stamp end-use segment a surge in demand towards the very end of the decade is anticipated as global and European track-and trace mandates are implemented.
While the increased demand for tax stamps is a true market expansion (sustainable for as long as tobacco consumption does not decline), the market potential for banknotes is slowly becoming smaller. At the same time, expansion in the personal ID market will be sluggish, as most high-value personal identification programmes, which began in the first decade of the 21st Century, have shifted from their mass-enrolment to maintenance phases.
Access to Smithers’ exclusive market data and research allows it to identify the following five key trends that are informing the transition and growth across the security print market.
The market shares of security features is changing
Across the study period, market evolution will have an impact on the relative share enjoyed by different overt and covert security features.
There is good news for suppliers of security inks and threads as these are expected to be the fastest growing technologies in the security feature segment. The main driver for this growth is market demand for colour shift and movement in security features; with holograms being adversely affected by this switch, resulting in a market growth rate roughly half that of inks and threads.
The growth rate for biometrics will decrease substantially across the study period, mirroring the decline in growth for personal IDs generally; and as a result of the encroachment of biometrics on mobile electronic devices taking market share from those on printed media.
Payment card providers are however partnering with third parties to develop biometric technologies on payment cards.
MasterCard is working with Norwegian firm Zwipe on a credit card featuring a fingerprint scanner. The company is also working with Bionym and the Royal Bank of Canada on trials of the former’s Nymi wristband, which uses cardiac rhythms to authenticate users. MasterCard also plans to launch a biometric payments solution with a major US credit union.
American Express has launched its own pilot that uses facial recognition to authenticate mobile payments. It believes biometrics can broaden the payment provider’s appeal to consumers in new segments, such as heavy mobile users who want to use digital payments.
Visa meanwhile is seeking industry partners as it looks to develop biometric solutions for the payments industry that would lead to frictionless payments in the future. Its vision includes a payment process that is conducted through biometrics, authorised Internet-connected devices and contactless payment systems, as opposed to physical cards and swipe terminals.
Tax stamps will create a major market opportunity
Smithers forecast shows that tax stamps are scheduled to experience explosive growth across 2015-2020. This is due to the implementation of new requirements for cigarettes deriving from implementations of the World Health Organization’s 2003 Framework Convention on Tobacco Control (FCTC) and the European Union’s 2014 revision of its Tobacco Products Directive.
Combined, these will help see the overall stamps market enjoy projected year on year growth of 13.3% for 2015–2020.
This increase is in spite of a declining market for postage stamps – the other component of this segment – with commercial users switching to franking (postage meter) equipment and a longer-term decline in posted letters due the prevalence of email communications.
Today, paper stamps with security features such as micro-lettering are widely used, but also widely counterfeited. Governments miss out on tax revenues – by some estimates as much as $100 billion – and criminal activities such as smuggling are rampant.
This is fuelling a move towards a new generation of tax stamps enhanced with track-and-trace capabilities. These are significantly more expensive to deploy and operate, but are very effective in ensuring authorities will earn their tax revenue. In the long run these systems thus become very cost-effective; preventing contraband trafficking, helping to protect public health, and reducing smoking in general by stopping illegal cigarette sales at below-market prices.
The technologies set to benefit most from the expansion in the stamp market are:
- RFID and coding (25.9%),
- Inks (15.6%),
- DOVIDs (7.7%).
Taggants will take a share of the market growth too, but are expected to be less in demand than digital technologies. Watermarks as a security printing technology will all but disappear in this application across the next five years.
Developing markets are increasingly important
In 2015, Asia represented almost 50% of the global market for security printing. This is hardly surprising because the region holds over 55% of the global population; China’s population by itself accounts for 19% of the world population, and India 18%.
Both countries are modernising rapidly with improved scrutiny of citizens, increased international travel, and the move to consumption of expensive – and frequently counterfeited – western luxury goods. This is manifesting itself across multiple end-use applications with the region set for an average year-on-year growth of 6.1%.
But the sheer size of India and China means any large-scale initiative in either country will disproportionately affect the global market moving forward.
The fastest expanding regional market for security printing is Africa. Smithers forecasts that value here will grow at an average annual rate of 9.6% across the study period, much faster than the overall market rate. The drivers for this are prestigious population growth and increased mobility across the region driving spending from authorities on several new ID programmes. The improvement of the financial infrastructure across the continent will also fuel a need for products protected by with security print features.
Longer lasting currency
The major shift in demand from central banks is for longer lasting currency. This is seeing investment in durable banknotes; made possible either by improved varnishing; or the use of paper-polymer composites or wholly plastic notes. Plastic substrate notes are now in around 25 states worldwide, with the UK poised to join this trend in 2016 with the Bank of England’s new £5 note featuring Winston Churchill.
Much of the high-value polymer substrate segment is now held by Guardian – a bi-axially-oriented polypropylene (BOPP) material developed by Innovia. Guardian is now in use in 78 denominations in 24 different countries worldwide.
Looking forwards, De La Rue is seeking to disrupt this hegemony with its SafeGuard platform – a multilayer varnish laid onto a durable polypropylene core with flexographic printing.
As polymer currency proliferates there is a need to design security features that can match their improved lifetimes. While this trend will ultimately lessen the volume of security features required, it creates a key opportunity for feature suppliers that can guarantee the longevity of their platform.
A parallel development is to focus on a new generation of cash handling machines that can process polymer or traditional notes that have been damaged.
State printers will put pressure on private sector service providers
The increasing market share of durable banknote substrates will ultimately reduce the number of new banknotes printed. Worrying for security print providers this is happening at a time when many state printers are looking to develop contracts beyond their domestic markets.
In 2015, state-owned paper mills are supplying almost 50% of banknote substrates (paper, durable and composite); commercial high-security printers are supplying 42% on contract, and 5% is overspill from state printing works. The remaining 3% covers polymer substrates. Though the demand for durable solutions will increase the share of the latter, the preponderance of paper or paper-composite substrates will endure across the study period.
The dominance of state printing works in printing is strong: about 85% of all banknotes are printed ‘in-house’. Korea Minting, Security Printing and ID Operating Corp are actively offering banknote paper and printed notes to offset falling domestic demand.
The South African Bank Note Company has increased its production capacity and is actively looking for new business. The decision of the central banks of Denmark and Belgium to outsource their printing operations, and others (Bulgaria, Kenya, Morocco) to develop joint ventures, does not weigh up to India’s decision to insource its note printing. Consequently the share of state printing is therefore expected to increase across the study period.
This does not bode well for high-security printers. Giesecke & Devrient has already a major restructuring exercise that will involve cutting 950 jobs, while De La Rue’s stock market performance across 2015 gives cause for concern.