According to a new report published by ABI Research, spending on the contactless hardware, software, and services market will reach $800 million by 2011, up from just $260 million in 2006. Contactless payment deployments are quickly expanding around the world because they speed retail payments and public transportation. However, these two largest contactless applications remain mostly separate, limiting the uptake of contactless cards and delaying the transition of contactless payment technologies into mobile phones.
The primary drivers for contactless transactions are proprietary transportation ticketing, and open credit, debit, and e-purse payments tied to financial service networks. Contactless transportation ticketing dominated spending on contactless hardware, software and services in 2006, accounting for more than four times the expenditure in the banking market. By 2011, however, card issuers and other financial groups will be spending three times as much as transportation providers.
Both technology and business issues must be resolved before a single contactless infrastructure can be leveraged by card issuers and the emerging mobile phone contactless payment market.
Contactless commerce uptake is taking place at varying rates across regions, national markets, and market segments, as contactless payments are added to existing payment networks and environments. In North America, open system payments are driving contactless adoption, whereas in Europe contactless ticketing systems are the primary drivers. It is in Japan and South Korea that contactless technology is making the greatest headway, in part because contactless payments have been built on the foundations of contactless transportation ticketing with a large degree of interoperability between the two payment environments – albeit within the non-standards-based environment of Sony’s FeliCa system.