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2008, the year of contactless payment?

Week 02, 2008

As any technology, there has been the need for several years of maturation. Adoption in mass transit systems was quick: Seoul, quickly followed by Hong Kong, Singapore, London and many others have adopted contactless payment means. A mass transit system is often under the control of a single authority, thus can evolve towards new means of payment following a simple decision process. However, the migration to contactless cards is not always easy, as we may see now in Australia (cf. Transport section).

The adoption of ePassport has made a lot for customer acceptance of contactless devices. Passport holders have been accustomed to the idea a portable object can communicate in contactless mode and be secure at the same time.

Reinforcing this confidence paved the way for contactless payment. MasterCard has been pushing PayPass for a couple of years now, and just anounced it has passed the 20 million cards on the field. It is still a drop in the ocean of magstripe cards: around one thousandth of the 17 billion cards in issue globally. However, we witness now contactless debit and credit cards grow out of pilot mode, and major rollouts happening.

These contactless cards are making end customers ready for the next technological change: NFC. Now the mobile communication and convergence world has to demonstrate it is able to build on these positive foundations. No doubt the frequency of NFC pilots announcements will keep on increasing in 2008. We will also witness the first real size rollouts. But what is still to be demonstrated, and is a prerequisite for mass customer adoption, is a global interoperability.

This global NFC interoperability will only happen if the industry is able to go forward on the standardization subject, and, maybe even more important, to agree on a business model preserving the interest of all stakeholders. Let's bet we will see it in 2008!

Thierry Spanjaard
Chief Editor
Smart Insights