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Ready for contactless?

Week 49, 2009

This week, we have reports about contactless cards.  IMS Research anticipates one billion contactless cards will be issued in 2014, on a global basis, and on all segments: health & governmental, transportation and payment & banking. Also this week, Visa said it expects the number of contactless cards deployed in Europe is set to reach 12 million units by 2010.

The missing broader view is the need for acceptance points to make issuing contactless cards economically viable. Contactless cards started in the transportation closed system environment, where the card issuer also manages card readers on subway gates, for instance. Now, we want to expand contactless to the payment area. Experiments have proved successful, and a few issuers, especially in Europe and in North America, have made moves to convert their cards to contactless technology or, at least, to add contactless functions to existing contact payment cards.

To make consumers understand and appreciate the benefits of contactless technology, they need to have a chance to meet acceptance points. Another study by IMS Research anticipates 12.5 million contactless POS terminals worldwide by 2013 (cf. Smart Insights Weekly #09-48). Of course, if this actually happens, it will be the solution to the current chicken-and-egg problem:  there are very few contactless acceptance points as there are very few cards; and there are very few cards as there are very few acceptance points!

Financial institutions that are at the same time major issuers and major acquirers are in the best position to help us out of this vicious circle. We can already see the couple Barclays – Barclaycard in the UK, or organizations like S2P (Carrefour group) and Banque Accor (Auchan Group) in France, supporting both contactless cards and contactless POS.

Thierry Spanjaard

Chief Editor

Smart Insights