Table of figures 5
Table of tables 6
Contactless payments allow payment cards to expand into areas traditionally associated with cash 7
Contactless payments allow quicker transactions for low value payments 7
Datamonitor definition of contactless payments 7
All contactless payment devices operate to the same standards 7
Contactless erodes the traditional advantages of cash 8
For the consumer the key advantage is speed and convenience 8
Merchants benefit from the ability to serve more customers, as well as reduced cash handling requirements 9
Card issuers benefit from greater card use and hence increased revenue 11
Contactless should therefore appeals to a range of merchant sectors 11
Transport systems have the potential to incorporate contactless payments 12
While several transit systems operate on closed loop systems, no major transit system yet accepts open loop payments 12
Convenience stores are a natural environment for contactless payments 14
However, a current limitation is a lack of product awareness 14
There is great potential for convenience stores 14
Contactless payments would improve customer convenience at petrol stations 14
Fast service restaurants, pubs and bars can also be suitable 15
The greatest advantages are in outlets where customer pick up their food then pay 15
In crowded bars, the benefits of contactless payments are clear 16
The rollout of contactless card has been relatively slow 17
By the end of 2008, there will be up to 80 million contactless cards in issue globally 17
Most of the activity has been in the US, but developments have been taking place in Europe and Asia 17
Chase Bank's full commercial rollout has driven growth in the US, and is a successful model for others to follow 18
Several other US issuers have since launched contactless 20
Product design and positioning in the US differ from that elsewhere 21
US contactless forms are all based on magnetic stripe technology, necessitating online authorization 21
There are also important differences in product positioning between the US and other markets 22
Further developments suggest more growth in the near future 22
Datamonitor estimates that the global contactless market has a potential value of $963 billion a year 24
Datamonitor's Contactless Payment Market Opportunity Model 24
The model covers 42 countries in three global regions, and focuses on six key retail sectors in each 24
The model presents data for 42 countries in three regions 24
Market sizing data is presented for each of the key retail sectors 25
Methodology and key assumptions 26
Stage one: Collection of total sales revenue by sector 26
Stage two: Breaking down this sales data by transaction value 26
Stage three: Determining the value of cash payments within each of the individual value bands 27
Stage four: Determining the range of values for contactless payments 27
Stage five: Preparing the output 28
Datamonitor estimates the global potential for contactless payments to be worth $963 billion per year 28
Transactions in the $10-25 range represent the biggest opportunity to the contactless opportunity 29
The European region offers the greatest potential for contactless payments, but the US is the biggest country market 29
The petrol retailing space offers the greatest opportunity globally 31
On a country by country basis, the most lucrative opportunity is petrol retailing in the US 33
The key areas for players to focus on are petrol and convenience retailers in the US and European markets 34
With rising prices and risks of fraud, there are some worries around the petrol retail area 34
The outlook for contactless is bright 36
Contactless payments have a positive outlook 36
The success of the rollouts suggests that the technology and the business model works for all parties 36
However, the costs of merchant acceptance are a potential problem area 36
A number of potential problems have been either solved or mitigated 36
Security remains a concern, but potential losses can be limited 37
The costs of launching contactless were seen as a potential problem 37
Contactless is still unlikely to be an overnight success 37
Generating momentum is the key 38
Issuers considering contactless should learn from the US rollout 38
Working with merchants is key to a successful launch 38
Targeting the right merchants is important in rapidly building acceptance 38
Making the necessary investment in physical and human capital to ensure a smooth operation 39
Looking ahead, growth in the US and Asia Pacific looks set to continue, while there will increased activity in Europe 39
The Americas - the success of Chase will inspire others to roll out contactless 39
Outside of the US, the future is less clear 40
Asia Pacific - interest is strong in several markets, and this will drive future growth 40
Further trials hold the key to growth 40
Europe - current interest suggests strong growth in the future 40
EMV migration is the important factor in European development 40
Legacy ePurse systems also present an opportunity 41
The current economic slowdown could well lead to a delay in the rollout of contactless payments 41
Nonetheless, in the longer run contactless payment cards are likely to play an important role in the market 41
APPENDIX 42
Definitions 42
AAGR 42
Average transaction value 42
Balances outstanding 42
CAGR 42
Charge card 42
Credit card 42
CVV 42
Debit card 43
EMV 43
Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions 43
Interchange 43
Methodology 43
Further reading 44
Ask the analyst 45
Datamonitor consulting 45
Disclaimer 45
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