Contactless Payments 2008

Content

• Overview
• Catalyst
• Summary
• Executive Summary
• Chapter One - Contactless Payments Allow Payment Cards to Expand into Low Value Payments
• Chapter Two - Datamonitor Estimates The Global Contactless Market to Be worth $963 Billion A Year
• Chapter Three - The Outlook for Contactless Payments Is Bright
  • Table of Contents
  • Table of figures
  • Table of tables
  • Contactless payments allow payment cards to expand into areas traditionally associated with cash
  • Contactless payments allow quicker transactions for low value payments
  • Datamonitor definition of contactless payments
  • All contactless payment devices operate to the same standards
  • Contactless erodes the traditional advantages of cash
  • for the consumer the key advantage is speed and convenience
  • Merchants benefit from the ability to serve more customers, as well as reduced cash handling requirements
  • Card issuers benefit from greater card use and hence increased revenue
  • Contactless should therefore appeals to a range of merchant sectors
  • Transport systems have the potential to incorporate contactless payments
  • While several transit systems operate on closed loop systems, no major transit system yet accepts open loop payments
  • Convenience stores are a natural environment for contactless payments
  • However, a current limitation is a lack of product awareness
  • There is great potential for convenience stores
  • Contactless payments would improve customer convenience at petrol stations
  • Fast service restaurants, pubs and bars can also be suitable
  • The greatest advantages are in outlets where customer pick up their food then pay
  • in crowded bars, the benefits of contactless payments are clear
  • The rollout of contactless card has been relatively slow
  • by the end of 2008, there will be up to 80 million contactless cards in issue globally
  • Most of the activity has been in the US, but developments have been taking place in Europe and Asia
  • Chase Bank's full commercial rollout has driven growth in the US, and is a successful model for others to follow
  • 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
  • Further developments suggest more growth in the near future
  • Datamonitor estimates that the global contactless market has a potential value of $963 billion a year
  • Datamonitor's Contactless Payment Market Opportunity Model
  • The model covers 42 countries in three global regions, and focuses on six key retail sectors in each
  • The model presents data for 42 countries in three regions
  • Market sizing data is presented for each of the key retail sectors
  • Methodology and key assumptions
  • Stage one: Collection of total sales revenue by sector
  • Stage two: Breaking down this sales data by transaction value
  • Stage three: Determining the value of cash payments within each of the individual value bands
  • Stage four: Determining the range of values for contactless payments
  • Stage five: Preparing the output
  • Datamonitor estimates the global potential for contactless payments to be worth $963 billion per year
  • Transactions in the $10-25 range represent the biggest opportunity to the contactless opportunity
  • The European region offers the greatest potential for contactless payments, but the US is the biggest country market
  • The petrol retailing space offers the greatest opportunity globally
  • on a country by country basis, the most lucrative opportunity is petrol retailing in the US
  • The key areas for players to focus on are petrol and convenience retailers in the US and European markets
  • with rising prices and risks of fraud, there are some worries around the petrol retail area
  • The outlook for contactless is bright
  • Contactless payments have a positive outlook
  • 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
  • Security remains a concern, but potential losses can be limited
  • The costs of launching contactless were seen as a potential problem
  • 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 increased activity in Europe
  • The Americas - the 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 current economic slowdown could well lead to a delay in the rollout of contactless payments
  • Nonetheless, in the longer run contactless payment cards are likely to play an important role in the market
  • Appendix
  • Definitions
  • AAGR
  • Average transaction value
  • Balances outstanding
  • CAGR
  • Charge card
  • Credit card
  • CVV
  • Debit card
  • EMV
  • Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions
  • Interchange
  • Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
• List of Tables
  • Table 1: Timeline of US contactless payment launches, 2005-2008
  • Table 2: Geographic coverage in Datamonitor's Contactless Payments Market Opportunity Model, 2008
  • Table 3: Payment value ranges in Datamonitor's Contactless Payments Market Opportunity Model, 2007
  • Table 4: Current relevant publications
  • Table 5: Future relevant publications
• List of Figures
  • Figure 1: Speed is central to the contactless proposition
  • Figure 2: Long queues can result in customers going elsewhere for their caffeine fix
  • Figure 3: Key facts about Chase Bank's contactless offering, 2008
  • Figure 4: Screenshots from Chase Bank's US contactless card commercial, 2005
  • Figure 5: Contactless payments have developed from 2003 to 2008
  • Figure 6: The contactless opportunity is worth $963 billion a year
  • Figure 7: on a regional level, Europe has the greatest potential for contactless payments, 2008
  • Figure 8: The US has the greatest potential for contactless payments, estimated at $297 billion, 2008
  • Figure 9: The largest potential market is the petrol retailing business
  • Figure 10: The biggest potential region for contactless payments in petrol is Europe, while North America has the biggest potential for fast food, 2008
  • Figure 11: The top 20 opportunities account for more than two thirds of the global potential for contactless payments, 2008