Spending on contactless payments to reach $800m by 2011

With adoption driven by some of the world’s largest card associations and banks, wireless operators and merchants, spending on contactless payments hardware and software will reach $870m by 2011, up from just $260m in 2006, amounting to a compound annual growth rate of 27%, according to a new study from ABI Research.

“Initial contactless payments deployments have already shown the ability to speed transactions and capture previously cash-only transactions for financial service networks,” says senior ABI analyst Jonathan Collins.

Echoing the sentiments of Mohammad Khan - two key applications are now driving adoption: transportation, and open credit, debit, and e-purse payments. At present, transportation represents the majority of contactless payment adoption around the world, but that position will be overtaken by adoption of payment systems within the next few years.

However, uptake is taking place at varying rates across regions, national markets and market segments, as contactless payments are added to existing payment networks. “In North America, open system payments are driving the contactless adoption,” says Collins. “In Europe contactless ticketing systems are spurring interest in contactless payments, but it is in Japan and South Korea that contactless technology is making the greatest headway. Built on the foundations of contactless transportation ticketing and with the additional boost from contactless payment-enabled mobile handsets, these markets are leading the way in realizing the potential for contactless payments.”

Elsewhere, while mobile handsets will develop to enable contactless payments, ongoing debate over how payment applications will be deployed and managed on wireless handsets has delayed the rollout of mobile handset contactless payments in the US and Europe.

These hurdles have slowed contactless technology’s evolution from promising first deployments to a widely-used, mainstream payment technology. Technology and business issues must be resolved to see open systems on mobile handsets and accepted at existing contactless-equipped transportation installations. In addition, consumers have to be comfortable with the use of the technology and confident in the security of contactless payments.

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