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Contactless Cards - Tentative Steps

  • March 2012
  • -
  • Timetric
  • -
  • 70 pages


Contactless payments are a hot financial topic, currently proclaimed as the technology that will transform how global consumers pay for goods and services. We investigate the extent to which different markets around the world have developed to date, and provide analysis and insight into how they will grow over the next two years. With this VRL report you will be able to:
- Assess the contactless card market
- Find out how the market will develop over the next two years
- Gauge the level of customer demand for contactless cards
- Learn about leading regional and global contactless schemes


This report presents the findings of research into the growth of this payment technology in key regions around the world. The picture that emerges is one of fragmentation and complex commercial models, with a marked lag between contactless card issuance and merchant acceptance, even in those markets considered to be well developed. In the US for example, there are around 100m contactless cards in issue, yet only a relatively small percentage of merchant outlets are reported to accept this form of payment, despite it being available for nearly ten years. Migration to chip and PIN is a more emotive topic in the US, with retailing giant Walmart making its position clear in the media as being in support of this more secure payment method, ahead of the introduction of contactless payments. This makes sense when the level of plastic card fraud in the US is taken into consideration. The push for migration is also in line with the strategic aims of large retailers to gain a greater share of consumers’ wallets by broadening the range of products and services offered in stores. Merchant acceptance of this payment methodology, alongside the issuance of cards and other payment devices, is crucial to the success of contactless payments. The majority of merchants are unlikely to be willing to fund the migration to contactless payments unless a clear business case and short payback period can be identified to them. In a number of countries, for example, Turkey and the UK, the card issuers and payment processing companies are footing the bill for the introduction of the required technology, and this will need to continue in order to increase merchant acceptance of contactless payments until the benefits of migration have been conveyed.


- The demand and utilisation of contactless cards worldwide is uneven. This report covers both the fast moving and high profile utilisation in Asia, and the more measured, supplier led markets in Europe and the US
- The relationship between cards and cash is discussed in detail in this report
- The report presents an analysis of the different reasons for contactless payment usage; security, speed, convenience and flexibility
- This report highlights case studies from the US, UK and Asia, and the results of one to one interviews
- This report features the latest technology in the sector, looking at it from both the bank, merchant and consumer perspectives
- The future of contactless payments is discussed – will it dominate, when, and what will be the interim solutions?

Reasons To Buy

- Contrast the contactless card market worldwide - markets in Asia, Europe and the US are featured
- Look at the 'best in class' features; find out what makes Oyster in London and Octopus in Hong Kong successful
- Find out what is driving the market; consumer demand or the introduction of new technology
- Grasp the near term technology and products being unleashed onto the market in the next two years

Key Highlights
- Contactless payments are being pushed by the payment providers without necessarily being demanded by consumers
- Aimed at displacing cash, which is generally disliked by merchants and financial institutions due to the costs incurred in its handling (including security), contactless payments face strong competition from increasingly popular chip and PIN debit card payments
- Although contactless cards are the short-term future for low-value payments, over time they will converge with mobile handsets

Table Of Contents

Contactless Cards - Tentative Steps

1 Introduction to contactless payments
1.1 Definition of contactless payments
1.2 The decline of cash
1.3 Contactless payment security
1.4 The technology involved in contactless payments
1.4.1 On Track Innovations - providing an alternative to payment-enabled handsets Contactless sticker OTI's current business relationships The importance of contactless infrastructure is key A lack of commitment from large retailers Contactless payments - such as closed loop, transport schemes
1.5 Is the mobile wallet the future of contactless payments?
1.6 Key Moves in Cards and Electronic Payments
1.7 Market Sizing of Advance Payment Market
1.8 Important features for contactless payments
1.9 Summary
2 Worldwide contactless card schemes
2.1 The technology behind the schemes
2.2 Brief histories of Visa and MasterCard
2.2.1 Visa
2.2.2 MasterCard
2.3 PayPass and PayWave location-based trials
2.4 National retailer rollouts
2.5 Sponsorship of major events will build consumer awareness
2.5.1 Visa forecast for 2012
2.5.2 VPay
2.5.3 Progress of PayPass trials
2.5.4 Consumer education is an important factor in contactless adoption
2.6 Summary
3 Contactless cards and payments in the US
3.1 Debit cards are driving payment growth
3.2 Migration to chip and PIN in the US
3.2.1 Pressure from some retailers for EMV migration
3.2.2 The consumer benefits of EMV are also clear
3.2.3 Cost and complexity are the big inhibitors of EMV adoption in the US
3.3 The Durbin Amendment
3.3.1 Impact of Durbin on banks
3.4 Mobile payments - trials and fragmentation
3.4.1 Visa and DeviceFidelity
3.4.2 Smartphone ownership is increasing
3.4.3 The potential impact of Google Android
3.4.4 Further developments in US contactless mobile payments
3.5 Summary
4 Contactless cards and payments in Europe
4.1 Specific developments in Europe
4.2 Forecasts for the growth of European contactless payments in 2011
4.3 Developments in the UK
4.4 Transport for London's Oyster card
4.5 Barclaycard - driving issuance of contactless cards
4.5.1 ‘Too much too soon' for consumers?
4.5.2 Awareness remains low amongst consumers, despite ATL advertising
4.5.3 Barclaycard OnePulse
4.5.4 Barclaycard contactless mobile payments
4.5.5 The future of contactless payments
4.6 SPAR - taking a calculated gamble on contactless payments
4.6.1 Regional acceptance of contactless payments
4.6.2 Challenges of contactless implementation
4.6.3 Security concerns
4.6.4 Benefits to SPAR stores
4.7 Contactless mobile payments in Europe
4.8 Contactless mobile payments - the Spanish experience
4.9 Everything Everywhere - the latest contactless mobile development in the UK
4.10 Garanti Bank of Turkey - enthusiastically embracing contactless technology
4.10.1 From trial to commercial roll out
4.10.2 Security concerns are not an issue for Turkish contactless mobile consumers
4.10.3 The ingredients for success in contactless payments
4.10.4 Merchant acceptance across Turkey
4.10.5 The future of mobile payments in Turkey
4.11 Payment Methods: What Do International Consumers Want, Need and Expect?
4.12 Visa Europe second quarterly Contactless Barometer study
4.13 Summary
5 Contactless cards and payments in Asia Pacific
5.1 The future of the Asia Pacific payment market is more and more cashless
5.2 Octopus - expansion beyond transport
5.2.1 The development of Octopus
5.2.2 Limited international expansion
5.2.3 The technology behind Octopus
5.2.4 Octopus acceptance
5.2.5 Octopus card types and form factors
5.2.6 Future issues and challenges facing the scheme
5.3 Other developments in the Asia Pacific
5.3.1 South Korea - strong contactless mobile growth is forecast
5.3.2 The increasingly greater spectrum of Korean prepaid cards:
5.4 Japan and Malaysia
5.5 Singapore, Hong Kong and Taiwan - cards fuelling growth
5.6 Add-ons - an interim solution to accelerate contactless mobile adoption?
5.7 Summary
6 The future of contactless cards and payments
6.1 Contactless payments are cash replacements
6.2 Big retailers are in no rush to adopt contactless
6.3 Speed through checkout is still a focus for larger retailers
6.4 Without the large retailers, market share of contactless will be negligible
6.5 Merchants are unlikely to bear the cost of contactless adoption
6.5.1 Support has been shown by payment processors and card issuers
6.5.2 Government support has been important in other regions
6.6 Contactless mobile payments are the future
6.6.1 Complexity is restricting the development of contactless mobile payments
6.6.2 Add-ons as an interim solution
6.6.3 New market entrants are challenging the traditional payment model
6.7 Summary

List of Tables

Table 1: Impact of PayPass on transaction behaviour compared with cash
Table 2: Contactless card and smart device growth rates 2010 - 2011
Table 3: Visa interchange fees for selected UK payment methods
Table 4: Size of the cash displacement opportunity in the US by sector

List of Figures

Figure 1: UK payment trends
Figure 2: Lost and stolen fraud losses on UK cards 2000-2010
Figure 3: Card-not-present fraud losses on UK cards, 2000-2010
Figure 4: MasterCard PayPass points of communication
Figure 5: OTI's contactless technology solutions
Figure 6: Numbers of RFID enabled phones forecast to be sold in 2015 (m)
Figure 8: Advance Payments: Global Market Size
Figure 7: Universal contactless payment symbol
Figure 8: Estimated cost of EMV migration ($bn)
Figure 9: Worldwide penetration of smartphones
Figure 10: UK grocery retailing - store numbers and sector values
Figure 11: Growth in smartphone handset volumes in Europe 2009 - 2010
Figure 12: Volume of smartphone handsets by EU country (000s)
Figure 13: Shareholding in Octopus Cards Ltd.
Figure 14: Octopus contactless key-ring
Figure 15: Contactless mobile payment transaction and value growth rate, South Korea

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