Growing product standardization and increased venture capitalist interest are the prime drivers of the European biometrics markets. In this burgeoning field, both government and private customers are in support of standards that will ensure product quality, allow for interoperability as well as limit costs, thus making this a very attractive field for venture capitalists.
Frost & Sullivan finds that European Biometrics Markets earned revenues of $370.1 million in 2005 and estimates this figure to grow to $948.8 million in 2008.
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The biometrics markets depend primarily on venture capital spending with an estimated 80 percent of it being funded by venture capitalists. However, venture capitalists base their financial commitment on the success of a project. Investing on an interest-return basis, they ensure ownership of intellectual property (IP) rights and retain the IP rights in case of pre-closure.
“With increasing scope for venture capital investments, there is an issue of IP rights that is being raised,” says Frost & Sullivan Business & Financial Services Analyst Janani Sankaran. “How prepared is the European biometrics market to combat this challenge?”
In a bid to reduce this risk, companies will depend on government or a research development agency funding in future. Such a move is likely to reduce the involvement of venture capitalists by 25-30 percent in the next five years.
Emerging technologies such as non-automated fingerprint identification system (Non-AFIS), facial recognition and voice verification are likely to drive the market further. Security-conscious governments imposing stringent regulations such as European biometric passports, the national ID program and the new Schengen information system-II are expected to bring in more revenue to the European market.
A key challenge for industry participants is the rapidly changing technologies in this dynamic industry that necessitate higher investments in research and development. To ensure survival, companies must constantly create new products or upgrade old ones.
“The survival of smaller companies depends largely on their ability to devote a greater share of their revenues to research and development,” explains Sankaran. “However, companies unwilling to spend large sums on technology investments are instead purchasing from unreliable market participants, therefore risking even more costly technology outlays in the necessary future.”
NIST and the Biometric Consortium have established the Biometric Interoperability, Performance, and Assurance Working Group to broaden the utilization and acceptance of biometric technologies and to facilitate and encourage, under the Biometric Consortium, further exchange of information and collaborative efforts between users and private industry in all things biometric. The BioAPI Consortium is working to ease end-user fears when purchasing biometric applications by coordinating interoperability standards within and across biometric segments. A large number of biometric companies are currently part of these or similar groups.
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