Contactless Payments 2006

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Contactless Payments 2006 Contactless Payments 2006 Reference Code: DMFS1839 Publication Date: 06/06 www.datamonitor.com Datamonitor USA Datamonitor Europe Datamonitor Germany Datamonitor Asia Pacific Datamonitor Japan 245 Fifth Avenue Charles House Kastor & Pollux Level 46 Wakamatsu Bldg 7F 4th Floor 108-110 Finchley Road Platz der Einheit 1 2 Park Street 3-3-6 Nihonbashi-Honcho New York, NY 10016 London NW3 5JJ 60327 Frankfurt Sydney NSW 2000 Chuo-ku USA United Kingdom Deutschland Australia Tokyo 103-0023 Japan t: +1 212 686 7400 t: +44 20 7675 7000 t: +49 69 9750 3119 t: +61 2 8705 6900 t: +813 6202 7681 f: +1 212 686 2626 f: +44 20 7675 7500 f: +49 69 9750 3320 f: +61 2 8705 6901 f: +813 5778 7537 e: [email protected] e: [email protected] e: [email protected] e: [email protected] e: [email protected] ABOUT DATAMONITOR Datamonitor plc is a premium business information company specializing in industry analysis. We help our clients, 5,000 of the world’s leading companies, to address complex strategic issues. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for six industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Healthcare, and Technology. Datamonitor maintains its headquarters in London and has regional offices in New York, Frankfurt, Sydney and Japan. FINANCIAL SERVICES CONSULTANCY We hope that the data and analysis in this report will help you to make informed and imaginative business decisions. However, it may be that the data or analysis does not perfectly meet your needs in which case Datamonitor is keen to help you further. Our consultancy division draws on the information held in our extensive databases and on the expertise of our industry experts to provide you with one of the most flexible and cost-effective business information solutions available. For further information about Datamonitor’s financial services consulting capabilities, please call Liz Hartley, Lead Consultant, Financial Services Consulting, on 020 7675 7148 - or send an e-mail to: [email protected] All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. Contactless Payments 2006 DMFS1839 © Datamonitor (Published 06/2006) Page 2 This report is a licensed product and is not to be photocopied Table of Contents TABLE OF CONTENTS INTRODUCTION 10 What is this report about? 10 Who is the target reader? 10 How to use this report 11 INTRODUCTION TO CONTACTLESS PAYMENTS 12 Introduction 12 Defining contactless payments 12 Contactless payments offer an opportunity for issuers to grow transaction volumes and therefore revenues 13 Contactless payments allow issuers to account for a greater share of low value payments, offering significant potential benefits 13 Contactless payments offer strong benefits for both consumers and merchants 16 Consumers benefit from greater speed, security and convenience 16 Merchants experience higher revenues and lower costs 17 Summary 18 RECENT DEVELOPMENTS IN CONTACTLESS 20 Introduction 20 Americas – the US is the most developed contactless payment market in the world 20 There are now over 10 million contactless devices in circulation in the US 21 Chase Bank’s full commercial rollout has driven growth in the US 22 Contactless Payments 2006 DMFS1839 © Datamonitor (Published 06/2006) Page 3 This report is a licensed product and is not to be photocopied Table of Contents Several other US issuers have since launched contactless 25 Product design and positioning in the US differ from that elsewhere 26 Current developments suggest further growth in the near future 28 Asia-Pacific – launches in several markets have resulted in growth across the region 29 Malaysia: the first market to deploy Visa Wave in mobile handsets 29 Taiwan: Visa Wave is also growing strongly in this market 30 Taiwan: MasterCard has announced a PayPass trial 30 South Korea: Visa Wave has become popular, with a mobile payments launch a probability 30 Singapore: Visa has teamed up with EZ-Link to offer contactless 31 MasterCard is conducting further trials across the region 31 Europe – no issuer has moved beyond the trial stage, but developments are imminent 32 UK: RBS the first to trial PayPass in Europe 32 Germany: Vodafone launches contactless transport payments 33 Summary 34 SIZING THE CONTACTLESS OPPORTUNITY 35 Introduction 35 Datamonitor’s Contactless Payment Market Opportunity Model 35 The model covers 41 countries in three global regions, and focuses on six key retail sectors in each 35 Methodology and key assumptions 38 Contactless payments – a global opportunity of US$724.2 billion 40 Contactless Payments 2006 DMFS1839 © Datamonitor (Published 06/2006) Page 4 This report is a licensed product and is not to be photocopied Table of Contents Across each of the regions covered, the combined value of cash payments in the selected sectors was US$724.2 billion in 2004 41 Service station retailing accounts for more than half the value of cash payments in the target value range 42 Europe represents the largest opportunity at the regional level 43 Americas: the US accounts for the bulk of the contactless payment opportunity 44 Across the Americas, the total contactless payment opportunity is US$285 billion 44 The US, Mexico, and Canada are the largest potential markets for contactless payments 46 Asia-Pacific: Japan and China present the greatest opportunities 51 Across the region, the total contactless payment opportunity is US$149 billion 51 Japan, China, and Australia are the largest potential markets for contactless 53 Europe: the UK and Germany present the greatest opportunities 58 Across the region, the total contactless payment opportunity is US$291 billion 58 The UK, Germany, and Italy are the largest potential markets in Europe 60 Summary 64 THE FUTURE DECODED 66 Introduction 66 The future looks bright for contactless payments 66 The success of the rollouts suggests that the technology and the business model works for all parties 66 A number of potential problems have been either solved or mitigated 67 However, contactless is still unlikely to be an overnight success 69 Issuers considering contactless should learn from the US rollout 70 Contactless Payments 2006 DMFS1839 © Datamonitor (Published 06/2006) Page 5 This report is a licensed product and is not to be photocopied Table of Contents Working with merchants is key to a successful launch 70 Looking ahead, growth in the US and Asia-Pacific looks set to continue, while there will soon be activity in Europe 71 Americas – success of Chase will inspire others to roll out contactless 71 Asia-Pacific – interest is strong in several markets, and this will drive future growth 72 Europe – current interest suggests strong growth in the future 72 APPENDIX 75 Supplementary data 76 Definitions 76 Research methodology 79 Future readings 80 Relevant links 80 Datamonitor’s custom research capabilities 81 Cards and Payments Team contact details 83 How to contact experts in your industry 83 Tell us what you think! At Datamonitor, your opinions count. Complete this short survey to help us continue to improve our service and provide the best in business information. Click here http://www.datamonitor.com/other/surveyredirect.asp?surveyid=5945120744 Contactless Payments 2006 DMFS1839 © Datamonitor (Published 06/2006) Page 6 This report is a licensed product and is not to be photocopied Table of Contents LIST OF TABLES Table 1: US contactless devices in circulation and merchant acceptance by card scheme, 2005 22 Table 2: Timeline of US contactless payment launches, 2005-2006 26 Table 3: Geographic coverage in Datamonitor’s Contactless Payments Market Opportunity Model, 2006 36 Table 4: Payment value ranges in Datamonitor’s Contactless Payments Market Opportunity Model, 2006 39 Table 5: Combined household expenditure of France, Germany, Italy, Spain, UK, and USA split by payment method, 1999-2003 76 Table 6: Current relevant Datamonitor publications, 2006 80 Table 7: Future relevant Datamonitor publications, 2006 80 Contactless Payments 2006 DMFS1839 © Datamonitor (Published 06/2006) Page 7 This report is a licensed product and is not to be photocopied Table of Contents 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 15 Figure 2: MasterCard is the leading contactless card scheme in the US, 2005 22 Figure 3: Key facts about Chase Bank’s contactless offering, 2006 23 Figure 4: Screenshots from Chase Bank’s US contactless card commercial, 2005 24 Figure 5: The global market opportunity for contactless payments in the selected sectors was US$724.2 billion, 2004 41 Figure 6: Petrol station retailing accounts for more than half the value of cash payments below $25, 2004 43 Figure 7: Europe represents the largest contactless
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