Good morning, good afternoon, and good evening, everyone. Thank you for joining the IDEX Biometrics second quarter presentation. I'm Vince Graziani, CEO of IDEX Biometrics. I really appreciate everybody joining for this call for the quarterly results. It's important to recognize the normal disclaimers here, that this presentation does contain some forward-looking statements. We'll just take a moment to pause on that so people can take a look and acknowledge, and then we can dive right in now to the quarterly highlights. We now have 18 banks coming to market with biometric smart cards based on IDEX Biometrics.
There's a new market entry with a bank in Azerbaijan this quarter. We did also get a large order of $1 million from a large European card manufacturer for serving banks in Bangladesh, India, and Eastern Europe. This was the first and largest order so far for the IDEX Biometrics total solution, the IDEX Pay, and we'll talk more about that later. Again, also on IDEX Pay, we were informed this quarter that we have successfully passed all of the Mastercard's technical testing for certification of this full solution.
We did hope to, by now, have our full certification announced, but we are still in the administrative process on finalizing that. There are some details that need to be finalized by EMVCo before the full certification certificate is issued. I can assure everybody in the meantime, that all technical testing has passed, and that's a very exciting milestone for us. This is what enabled our first customer to have the confidence to go ahead and start placing orders with us.
On the digital authentication front, we've made continued progress there. This is a market that just continues to grow globally. The cybersecurity, and therefore digital authentication, is becoming a larger and larger issue. W e have new market entries coming to market with IDEX Biometrics-based cards that are used for digital authentication. This includes AuthenTrend in Taiwan, MCS in Malaysia, PONE Biometrics in Europe. We also joined the FIDO Alliance for security and access control, and that's another big milestone for IDEX.
Our partner, Sentry, has now also launched a biometric cold storage crypto wallet product that also is in very heavy demand and getting a lot of interest in the marketplace. That overall market continues to grow as well. On the card manufacturer side, we just continue globally to add customers and partners in the card manufacturing base.
For IDEX, our IDEX Pay total solution, we are winning hands down with every card manufacturer that takes a sample card and does some testing and evaluation. The latest announcement was Goldpac in Hong Kong. This Goldpac card will be used for banks and issuers outside of China. We have traditionally worked in the past with Goldpac for a local card in the Chinese market that was approved by China UnionPay. This new design win is for our full IDEX Pay solution that will be used outside of China on the other major payment networks. This is another major deal with one of the world's largest card manufacturing partners. We're very happy to have that design win.
Beautiful Card Corporation in Taiwan is now also committed to using the IDEX Pay full solution, and they have started to manufacture cards and get the system rolling on their side to be able to roll out in volume. Also in Europe, Thames Technology, a large card manufacturer in the U.K., has committed a project to IDEX Biometrics-based card, as well as SELP in Europe, and another major card manufacturer in the Middle East, who prefers at this time to remain anonymous.
This is one of the larger card manufacturers globally and focused, in this particular case, on the Middle East. Overall, good progress in the quarter. Let's now move on to the financial summary for the second quarter and the first half of 2023. Once again, we have had a record revenue quarter with nearly $1.5 million in revenues. Revenues were up quarter-over-quarter and year-on-year, and we're very happy to see the revenues continue to grow.
This reflects growth in the payment space as well. Payment, as a percentage of our total revenues, also went up. Gross margins in the second quarter were 22%, compared to 26% in the first quarter. I should note, though, that gross margins were impacted by some inventory adjustments that we needed to record in the quarter. If not for these inventory adjustments, gross margins would have been about the same as in Q1.
These margins largely reflect customers that we signed on in our very early days when we were selling primarily the biometric sensor component, and we expect these margins to increase over time as the percentage of shipments begins to shift towards the IDEX Pay total solution, and we'll talk more about that later. Operating expenses were decreased during the quarter, down to $7.3 million. I think it's more important to note that during this quarter, we took further actions to substantially reduce our operating expenses.
Now that we're at the stage where the IDEX Pay total solution is complete and has gone through all the certification testing, we're able to continue to streamline our operations, focusing more on our commercialization and less on R&D. That's just going to be the right balance for the company going future, as we switched out of the mode of being a nearly pure R&D company to being a balanced R&D and commercial company going forward. We took several actions during this quarter and reduced overall operating expenses by 30% when compared to OpEx in the first quarter.
We have a long-term target here of, that 30% should get us down to around $5 million per quarter. A lot of those actions will be in full effect by the fourth quarter. We'll see some impact in the third quarter, but the overall impact will be in full effect by the fourth quarter of this year. In terms of the commercial update, we now have a total of 19 card manufacturers coming to market with IDEX-based solutions. Every quarter, this number just continues to grow.
Also important to note that these 19 card manufacturers, now can address a total of 1.4 billion in terms of total volumes of cards. Obviously, we're not going to have that kind of a volume overnight. As I've said in prior presentations, even a small percentage of the card volume from each one of these card manufacturers will make IDEX a very successful company. It's also important to note that all of these card makers make a fairly substantial investment to bring biometric smart cards to market. Even though the banks continue to roll out more slowly than analysts had originally predicted, obviously, these card manufacturers see the market coming, and they're investing now to be ready for the rollouts.
When we talk about banks and rollouts, we are now up to 18 banks that are launching biometric smart cards with IDEX biometric technology on board. These banks are global, and we're seeing other banks globally coming in other regions as well. Just with these banks alone, there's 50 million cardholders that can be addressed, and 780 million total payment cards in circulation across all of these markets that we're targeting globally. As we've said in the past, it's a large market. I think we all would love it if the banks would move more quickly.
From our experience, what's happening right now is the banks are really doing their due diligence, making sure they have all the pieces in place to have a successful rollout. When they roll out to their broader customer base, it's a successful product and a good user experience. Again, we just continue to see momentum building. We're working in the market development phase in some of the other regions here, in India and in Brazil and other regions in the globe that are preparing, and we expect to have bank announcements from some of these other regions in the quarters to come.
On the digital authentication side, we now have nine partners who are launching products for digital authentication based on IDEX biometric solutions. We're seeing growing momentum for people that want to use this biometric card as part of their digital authentication and cybersecurity suite. One of the big advantages of the biometric card is personal data privacy. With the biometric card, as a reminder, your biometric fingerprint is encrypted and stored only on the card, so we never need to worry about the next data breach.
It gives you dramatic security improvement over a standard access control or access card today, because only the user of the card will have the card and be able to match the biometrics. We're seeing this as a global trend, not in any one particular region, but globally, the cybersecurity trend for digital authentication is just a very large market. Overall, this will be over $100 billion in the years to come.
As I mentioned earlier, we're accelerating globally, and we're targeting specific markets. We have a very detailed plan for market approach and how we open up new markets. I'll talk about that again in just a few minutes here. Again, India is a target market for us. We've mentioned this in the past. There are one billion payment cards in circulation, and it's still growing in India at a 19% CAGR growth rate. There are five million merchant terminals in India, and 60% market share in India for RuPay, which is the local card payment network in India.
We're working very closely with both Mastercard, Visa, and the local payment scheme with RuPay. Most of the cards are dual interface these days in India, which all the POS terminals need to support, which means we have built-in support for smart cards with biometrics from IDEX Biometrics. Again, a large target market, and we'll continue to work on this.
There's also a government initiative to have a digital inclusion across the country. When you think about some of these larger population areas, smartphone penetration is not as large as it is here in the West. The biometric smart card, even though it's more expensive than a standard payment card, is a much lower cost way to bring people into the digital world. Governments like the government in India have initiatives in place to make that happen.
In Turkey, t his is the largest payment card market in Europe. Those who have listened to our presentations before are aware that we've had a focus there now for about 18 months. We've learned a lot in that market that we're now able to apply to different regions as well. We continue to ramp things up in Turkey, where we're signing up more and more banks, and those will be supported by our local card manufacturing partner, E-KART. We look at other areas like Bangladesh, where there's 33 million cards in circulation.
Again, cards are still growing and in large numbers, and there's nearly five million merchant terminals, a high percentage of contactless penetration and growing. The volume in a country like Bangladesh could grow dramatically. Again, we're focused across the globe, and we will continue to use our method to open up market by market and region by region, signing on banks and card manufacturers locally to grow the business in the future.
Speaking about our go-to-market strategy, we did come up with this go-to-market approach, and we perfected when we tried to open up the market in Turkey. Our first step when we enter any new region is to do a market assessment, understand the consumer demand, and try to help create demand in the consumer base.
We also make the business case for the biometric smart cards so that we can educate the card manufacturers locally, the banks and issuers. We also work with the local government agencies to make sure we get all the regulatory approvals so that biometric smart cards can come to market. We work closely with our ecosystem partners. In many cases, the large payment networks work together with us to help open up a market.
We work with local manufacturers of smart cards so that we can get biometric smart card manufacturing set up locally. We work to make sure we understand total solution readiness and what it takes for the local banks and issuers to successfully roll out pilots and then do volume rollouts in these local markets.
We work together with the banks and fintechs to educate them on the key segments, where to roll out first, understand how they can tell their customers what's the value prop, and make sure their marketing and go-to-market plans are in place. As I said earlier, we also help them put everything in place to do pilots and then launches and roll out the program successfully. Ultimately, the goal is to get these cards in the hands of consumers at the end.
There we work on the full solution, including a variety of enrollment solutions. Now, today, you can, from IDEX, enroll either via the standalone sleeve or enroll on a smartphone. In the future, we intend to have an enroll at the POS or enroll as you pay, as an enrollment option as well in the very near future. Our go-to-market approach has been working, and we worked very well on this in Turkey. We've taken the same approach to other regions globally and fine-tuned it, and we're seeing great success there as well. We hope to be able to announce banks in all of these other regions very shortly.
In terms of the regulatory landscape, this is really a tailwind for us. We're getting a little bit of the help from regulatory and industrial trends to help roll out the biometric smart cards globally. If you look at major market trends, fraud and hacking and identity theft, there's an increased concern globally. Consumers are very much worried about data privacy. This is a big advantage for the biometric smart card because all of your personal information never leaves the card, and the card is never connected to the internet. It's guaranteed from day one that a biometric smart card is GDPR compliant. That's quite a feature, and there's not many other forms of data security that have that feature built in as just inherent part of the technology.
Digital exclusion is a growing issue. With our global world that we live in today, everything is being done more and more digitally. Most of the younger generation do everything digitally. The analog world, they've never even been introduced. In parts of the world where smartphone penetration is low, access to computers and internet may be low, many people are getting left behind in an all-digital world. As I mentioned earlier, this biometric smart card is a very low-cost way to enable people to authenticate themselves, to make payments, and be included in a digital world. We can believe that we're going to continue to see this trend be a benefit for the biometric smart card. The regulatory environment, as I mentioned earlier, there's more and more concern over data privacy.
In parts of the world, there are laws about data privacy, and the biometric smart card has the benefit of being compliant with these laws just by nature of the design. In the U.S., the White House is looking to modernize multi-factor authentication. They've asked industry leaders from around the world to come into a symposium to discuss these topics. We're proud to say that IDEX was included as part of that conversation.
In the EU Payment Services Directive, PSD3 is focusing on accessible payments and inclusive authentication solutions. Again, the biometric smart card becomes a very good way to be inclusive and bring more and more people into the payment world and the digital payment world specifically. There's some industry standardization happening, which also helps any industry really take off. EMVCo, which stands for Eurocard, Mastercard, Visa, is a industry association that manages all standardization for the payment networks here in the West and globally. That EMVCo association is now have a standardization specification for biometric payment card performance. That, again, will help the overall industry to grow more quickly.
The FIDO Alliance has now set standards for passwordless authentication. The biometric smart card is a fantastic way to have passwordless authentication. Again, we expect to get some momentum from that initiative. The national payment schemes continue to progress towards biometric standards. These are the debit payment schemes that tend to be country by country and in some cases, region by region. Again, that debit and card market locally is just a massive market as well, and those cards also can be easily turned into biometric smart cards. As the market progresses, there's many, many opportunities for biometric smart cards to grow and, therefore, the IDEX biometric solution to grow along with that.
Again, I'll take a moment here to just remind everybody about the biometrics, IDEX Biometrics business model. IDEX started out as a biometric sensor company, and then we evolved our solution to include the full biometric system, including the sensor, all the biometric software, including the matcher, et cetera, and encryption software.
Now, in the last 18 months, we've gone to a fully certified card solution, where we have the full card operating system, a standard API interface where various applets can be plugged in for various payment applets for Visa, Mastercard, RuPay, others, et cetera, and also applets for authentication, digital authentication, and even cryptocurrency wallets. Again, having this platform approach enables us to provide a full solution to the marketplace, but also capture more of the total value chain for IDEX going forward.
In our go-to-market strategy, we do direct sales for demand creation. Even though we're a technology provider, primarily, we do take our knowledge and go out directly to card issuers and banks as well, to educate them on the benefits of biometric smart cards, what would be the benefits to their customers, and primarily educate them on how they can make money with biometric smart cards. We work very closely with our card manufacturing partners, who also do their own marketing and demand creation, but together, we can service the banks and issuers and security, cybersecurity companies and digital authentication partners out there.
We have several resellers globally that take the IDEX solutions, either in a solution kit form or in a full card turnkey form, and resell that solution to local card manufacturers and banks and issuers as well. We have a very comprehensive go-to-market strategy that services the needs of each region and each particular partner. Again, we're focused on payment and banking, public services and private services, and then our enterprise and government security marketplaces.
Again, we have partners to go with us to all of these major marketplaces to address the big market opportunity. At the end of the day, it really is all about the customer journey. If these cards aren't intuitive and simple to use, then they simply won't be adopted in the high volumes that we're all anticipating. For the customer journey, we can break that down into three simple steps.
Step one is you get the card welcome kit at home. Then you add your fingerprint to the card at home, either via an app on your smartphone or by the sleeve enroll, or eventually by enroll at the POS terminal. Then you activate the card, very much similar to the way you activate any of your banking cards today, through a secure banking channel or the banking apps. Then you go out and pay and use the card, and you have that personal security and confidence that you're now paying with no fraud risk. You don't need to worry about remembering multiple PINs. Biometric authentication happens in about 1/4 of a second. Your total transaction is about 1/2 a second, so the user experience is much more secure, but exactly the same experience you're getting from your contactless cards today.
In terms of the market outlook, where things are going, we have not changed our forecast view. We have used this graphic in the past, but if we look at ABI Research, they have a conservative, low penetration scenario where they anticipate by 2026, the market is around 50 million biometric smart cards globally. They have a more aggressive market model, where they expect by 2026 to be around 250 million biometric smart cards globally.
At IDEX, we continue to monitor market penetration. We continue every week, every quarter, to interface with banks and customers and card makers. We use all our own intelligence to do our own judgment here. Again, our market forecast is for about 100 million cards or just under 100 million total by 2026. This still represents a very, very large market opportunity for IDEX and the others in this space.
Just to remind everybody, right now, there are really only two major competitors out there that have solutions for biometric smart cards, and that we would contend that our solution is by far the best. Again, to repeat, we now have certified solutions with 19 card manufacturers, 18 banks already coming to market and announced, more to follow, and nine partners in the digital authentication space.
It's these customers in our pipeline and more that we are aware of in our pipeline, that those are the basis for how we do our forecast for the overall market penetration. IDEX is really ideally positioned for a global scale. We have a single platform that it can address in multiple markets, in multiple regions, and multiple applications. We are uniquely positioned compared to the competition with our sensors, software, and full suite operating system. Really, just a total solution that we're having pre-certified, so, we can get customers to market quickly.
In summary, yes, just repeat this last point about we have a single platform that's integrated and scalable, hitting multiple applications and targeting multiple regions around the globe. Just to remind everybody of some of the key attributes of our technology, we have the largest sensor area, which means we capture more data from your fingerprint with each touch, which means you have a better user experience, much lower false rejection rates and overall matching time, best in the industry.
We have the biometric software platform that's secure and has minimized risk for any sort of data breach or hacking. We have our ready-to-launch pre-certified solutions that enable card manufacturers to choose our solution and then come to market very quickly. Again, we're flexible on market penetration. We're focusing on secure payments, identity access, and then crypto asset management. All can be done with the same standard card.
If you have not seen this photo before, this is a new demo card from IDEX that's actually a full functional card, but designed in clear plastic so that people can clearly see how simple the overall card design is and how easy it is for card manufacturers to manufacture a card based on IDEX. You simply have the EMV module embedded and the IDEX sensor embedded, and no other active components need be laminated inside the card. Let's again review our operating model. We maintain our current target operating model. We have our solid customer base, 19 manufacturers and growing.
Our certified card solutions are addressing the Tier Two and Tier Three, and now even some Tier One manufacturers, counting Goldpac, are choosing our fully turnkey certified solution because they see the value there of this full solution coming to market. It shortens time to market, and they don't need to worry about compliance or certification. Our target operating model at scale will be improving margins up to 50% gross margins.
We still anticipate a 30% operating margins going forward. Again, I should emphasize that as we bring this full IDEX Pay solution out to market and start ramping that up as a bigger percentage of our volume, you will see those gross margins continue to improve because we're providing more of the total solution and therefore capturing more of the total value chain.
The overall corporate model is very similar to any fabless semiconductor model. We can grow the company and continue our commercialization with our current product for several years to come. We still have our team working on future generation product. One of the benefits of this whole industry is products tend to last for multiple years, three to five years in the marketplace. By the time we're ready for our next generation product, we are confident we will be leapfrogging again ahead of the competition. Again, in summary, let's just sum her up with the major points. IDEX is enabling the future of payments and authentication. Our solutions are addressing a multi-billion unit, multi-billion-dollar market opportunity.
We have, by far, the leading customer experience and leading technology. I think this is demonstrated by our track record with all of the card manufacturing design wins we've achieved in the last year and a half. We have a disruptive biometric solution. We finally hit the performance and cost points that we believe are in place to finally allow this market to take off.
We believe that we are capturing the market at an inflection point. I'm personally convinced that our full turnkey solution, with its performance and ease of use, is really going to be the key enabler to drive this market inflection point finally. You know, we now have 19 card manufacturers coming to market that prove the point. In summary, I would just like to thank everybody for joining our Q2 presentation, and I look forward to more announcements and more progress from IDEX in the quarters to come.