Product Type: Market Research Report
Published by: Datamonitor
Published: June 2006
Product Code: R313-14608Description Introduction
Despite accounting for a growing share of payments, cards are not widely used for low value transactions. However, saturation makes this an important area for issuers to target, and contactless payments offer a way to capture some of this activity. But what are the recent developments? Which markets offer the greatest opportunity? What does the future hold? This report provides the answers.
Scope
- This report builds on Datamonitor's previous coverage, providing detailed analysis and overview of recent global developments in contactless payments
- In-depth coverage of the successful launch in the US provides a blueprint for successful contactless rollouts in other markets
- A comprehensive data model, delivered in Excel, sizes the potential market for contactless payments across six key merchant sectors in 41 countries
- The views of Datamonitor's Cards & Payments Team on the likely future developments in contactless payments in the Americas, Asia-Pacific, and Europe
Highlights
Cash accounts for a significant proportion of total consumer payments even in the most developed card markets. Figures from Datamonitor's Consumer Payments Model show that cash accounted for around 20.4 per cent of the total value of consumer payments in France, Germany, Italy, Spain, UK and the USA, in 2003. This is down from 21.6 per cent in 1999
The US is also the world's largest contactless payment card market. By the end of the first quarter of 2006, there were more than 10 million contactless devices in circulation in the US, with acceptance reaching over 160,000 terminals in 30,000 merchant locations. This shows rapid growth over what is a short space of time.
The largest potential opportunity for contactless payments is in the service station retail sector. The value of cash transactions below a value of US$25 for both petrol and service station based convenience retail in the 41 markets covered in the model was US$376 billion (EUR303 billion) in 2004.
Reasons to Purchase
- Discover the latest developments in contactless payments, and find out what has been happening in your key markets
- See the scale of the potential market opportunity for contactless payments in both developed, and developing, card markets
- Learn from the US rollouts to see how to manage a successful contactless payment launch
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
|
|
