Table of Contents
- INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
- INTRODUCTION TO CONTACTLESS PAYMENTS
- Introduction
- Defining contactless payments
- Contactless payments offer an opportunity for issuers to grow
transaction volumes and therefore revenues
- Contactless payments allow issuers to account for a greater share of
low value payments, offering significant potential benefits
- Plastic cards in their present form can only account for a certain
proportion of the overall payment landscape
- Capturing a portion of these transactions will generate significant
additional revenues for issuers
- Contactless payments offer strong benefits for both consumers and
merchants
- Consumers benefit from greater speed, security and convenience
- Merchants experience higher revenues and lower costs
- Summary
- RECENT DEVELOPMENTS IN CONTACTLESS
- Introduction
- Americas - the US is the most developed contactless payment market in
the world
- There are now over 10 million contactless devices in circulation in
the US
- Chase Bank's full commercial rollout has driven growth in the US
- Chase Bank customers can now 'blink' their payments
- Several other US issuers have since launched contactless
- Product design and positioning in the US differ from that elsewhere
- US contactless forms are all based on magnetic stripe technology,
necessitating online authorization
- There are also important differences in product positioning between
the US and other markets
- Current developments suggest further growth in the near future
- Citibank is conducting a six-month trial of contactless payments at
ticket barriers on the New York subway
- Visa introduces a contactless Mini Card
- Asia-Pacific - launches in several markets have resulted in growth
across the region
- Malaysia: the first market to deploy Visa Wave in mobile handsets
- Taiwan: Visa Wave is also growing strongly in this market
- Taiwan: MasterCard has announced a PayPass trial
- South Korea: Visa Wave has become popular, with a mobile payments
launch a probability
- Singapore: Visa has teamed up with EZ-Link to offer contactless
- MasterCard is conducting further trials across the region
- Europe - no issuer has moved beyond the trial stage, but developments
are imminent
- UK: RBS the first to trial PayPass in Europe
- However, Transport for London has dropped its own contactless plan
- Germany: Vodafone launches contactless transport payments
- Summary
- SIZING THE CONTACTLESS OPPORTUNITY
- Introduction
- Datamonitor's Contactless Payment Market Opportunity Model
- The model covers 41 countries in three global regions, and focuses on
six key retail sectors in each
- The model presents data for 41 countries in three regions
- Market sizing data is presented for each of the key retail sectors
- Methodology and key assumptions
- Stage 1: Collection of total sales revenue by sector
- Stage 2: Breaking down this sales data by transaction value
- Stage 3: Determining the value of cash payments within each of the
individual value bands
- Stage 4: Determining the range of values for contactless payments
- Stage 5: Preparing the output
- Contactless payments - a global opportunity of US$724.2 billion
- Across each of the regions covered, the combined value of cash
payments in the selected sectors was US$724.2 billion in 2004
- Transactions in the range $5-25 present the greatest opportunity
- Service station retailing accounts for more than half the value of
cash payments in the target value range
- Europe represents the largest opportunity at the regional level
- Americas: the US accounts for the bulk of the contactless payment
opportunity
- Across the Americas, the total contactless payment opportunity is
US$285 billion
- Petrol retailing presents the single largest opportunity for
contactless payments in the Americas
- The US, Mexico, and Canada are the largest potential markets for
contactless payments
- As in the case of Asia-Pacific, the regional opportunity is
concentrated in only a few markets
- The petrol retail and fast food markets represent the largest
opportunites in the US market
- The petrol retail and convenience store sectors offer the greatest
opportunities in Mexico
- Petrol retailing and fast food lead the way in Canada
- Asia-Pacific: Japan and China present the greatest opportunities
- Across the region, the total contactless payment opportunity is US$149
billion
- Petrol station retailing offers the greatest opportunity, but
convenience stores also hold significant potential
- Japan, China, and Australia are the largest potential markets for
contactless
- There are huge differences in the size of the contactless
opportunity across the region
- The petrol retail and convenience store sectors in Japan are
particularly attractive
- The convenience store market provides the greatest potential in China
- In line with the rest of the region, the biggest opportunities in
Australia are in petrol retailing and convenience stores
- Europe: the UK and Germany present the greatest opportunities
- Across the region, the total contactless payment opportunity is US$291
billion
- Petrol retailing and convenience stores are the two sectors offering
greatest potential
- The UK, Germany, and Italy are the largest potential markets in Europe
- The distribution of this opportunity is more even than in other
regions
- Petrol retailing and pubs and bars present are the largest sectors
in the UK
- The largest opportunities in Germany are in petrol retailing and
convenience stores
- The contactless payment opportunity in Italy is concentrated in the
petrol retailing and convenience store sectors
- Summary
- THE FUTURE DECODED
- Introduction
- The future looks bright for contactless payments
- The success of the rollouts suggests that the technology and the
business model works for all parties
- However, the costs of merchant acceptance are a potential problem
area
- A number of potential problems have been either solved or mitigated
- A lack of interoperability is an obvious concern, but co-operation
between the schemes should prevent this
- Security remains a concern, but the potential losses can be limited
- The costs of launching contactless were seen as a potential problem
- However, contactless is still unlikely to be an overnight success
- Generating momentum is the key
- Issuers considering contactless should learn from the US rollout
- Working with merchants is key to a successful launch
- Targeting the right merchants is important in rapidly building
acceptance
- Making the necessary investment in physical and human capital to
ensure a smooth operation
- Looking ahead, growth in the US and Asia-Pacific looks set to continue,
while there will soon be activity in Europe
- Americas - success of Chase will inspire others to roll out contactless
- Outside of the US, the future is less clear
- Asia-Pacific - interest is strong in several markets, and this will
drive future growth
- Further trials hold the key to growth
- Europe - current interest suggests strong growth in the future
- EMV migration is the important factor in European development
- Legacy ePurse systems also present an opportunity
- The UK is seen to be the biggest prospect for contactless in Europe,
but several other markets offer strong potential
- APPENDIX
- Supplementary data
- Definitions
- Card scheme
- Chip card
- Credit card
- Debit card (pay now)
- EMV
- General purpose
- Interchange
- Macropayment
- Micropayment
- Merchant acquiring
- Merchant Service Charge (MSC)
- mPayment (mobile payment)
- POS terminal
- Smart card
- SMS
- Research methodology
- Secondary sources
- Primary sources
- Future readings
- Relevant links
- Datamonitor's custom research capabilities
- Cards and Payments Team contact details
- How to contact experts in your industry
- List of Tables
- Table 1: US contactless devices in circulation and merchant acceptance
by card scheme, 2005
- Table 2: Timeline of US contactless payment launches, 2005-2006
- Table 3: Geographic coverage in Datamonitor's Contactless Payments
Market Opportunity Model, 2006
- Table 4: Payment value ranges in Datamonitor's Contactless Payments
Market Opportunity Model, 2006
- Table 5: Combined household expenditure of France, Germany, Italy,
Spain, UK, and USA split by payment method, 1999-2003
- Table 6: Current relevant Datamonitor publications, 2006
- Table 7: Future relevant Datamonitor publications, 2006
- List of Figures
- Figure 1: The share of cash within the value of all household
expenditure in France, Germany, Italy, Spain, UK, and USA is falling,
1999-2003
- Figure 2: MasterCard is the leading contactless card scheme in the US,
2005
- Figure 3: Key facts about Chase Bank's contactless offering, 2006
- Figure 4: Screenshots from Chase Bank's US contactless card
commercial, 2005
- Figure 5: The global market opportunity for contactless payments in
the selected sectors was US$724.2 billion, 2004
- Figure 6: Petrol station retailing accounts for more than half the
value of cash payments below $25, 2004
- Figure 7: Europe represents the largest contactless payment
opportunity at the regional level, 2004
- Figure 8: The market opportunity for contactless payments in the
Americas was US$284.8 billion in 2004
- Figure 9: Petrol retailing and fast food are a US$207.5 billion
contactless payment opportunity in the Americas, 2004
- Figure 10: The US, Mexico, and Canada present the largest potential
opportunity for contactless payments, 2004
- Figure 11: Petrol retailing and fast food present the largest
opportunities in the US, 2004
- Figure 12: Petrol retailing and convenience stores offer the greatest
opportunities in Mexico, 2004
- Figure 13: Petrol retailing and fast food are the most important
sectors in Canada in terms of the contactless payment opportunity, 2004
- Figure 14: The market opportunity for contactless payments in the
Asia-Pacific region is US$148.5 billion, 2004
- Figure 15: Petrol station and convenience store retailing are a
US$109.9 billion opportunity in Asia-Pacific, 2004
- Figure 16: Japan and China present the largest opportunity for
contactless payments, 2004
- Figure 17: Petrol retailing and convenience stores present the
greatest opportunities in Japan, 2004
- Figure 18: Convenience stores are the sector presenting the greatest
contactless payment opportunity in China, 2004
- Figure 19: Petrol retailing offers the largest opportunity in
Australia, 2004
- Figure 20: The potential market for contactless payments in Europe is
US$290.9 billion, 2004
- Figure 21: Petrol retailing and convenience stores are a US$231
billion opportunity in Europe, 2004
- Figure 22: The UK, Germany, and Italy present the largest opportunity
for contactless payments in Europe, 2004
- Figure 23: Petrol retailing and pubs and bars present the greatest
opportunities in the UK, 2004
- Figure 24: Petrol retailing and convenience stores present the
greatest opportunities in Germany, 2004
- Figure 25: Petrol retailing and convenience stores present the
greatest opportunities in Italy, 2004
- Figure 26: Datamonitor's Core Consulting Capabilities
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