Euromonitor research finds contactless card growth solid despite global recession

According to Euromonitor findings, the spread of contactless card technology has continued apace on a global level through 2010, gathering momentum in markets outside first mover region Asia Pacific. Despite decreased consumer spending and tighter margins for both card issuers and retailers during the global recession, investment in contactless technology is growing as both industry and consumers realize the benefits of contactless products.

Contactless catching on in developing markets

While developed Asia Pacific markets including Japan, Hong Kong and Singapore have been the most fertile ground for contactless card development over the past decade, contactless cards have made strides in a number of developing markets recently.

Poland and Turkey have both seen rapid growth in contactless cards over the past two years as card issuers there have made innovation a key part of their strategies, using contactless as a branding tool to attract younger consumer segments.

Poland’s PKO Bank Polski, the market’s largest issuer by card numbers in 2009, is converting its entire Visa portfolio to contactless cards through mid-2012, while Citi Handlowy, Polbank, Invest-Bank, Millennium and Deutsche Bank PBC are joining the ranks of Polish contactless issuers – already including Bank Zachodni WBK SA, ING Bank Slaski SA, Alior Bank, mBank and Multibank – during 2010.

The buzz of activity in issuance has spurred on merchant acceptance of contactless in Poland during 2010, as well. Contactless acceptance points are expected to more than double in Poland by the end of 2010, covering almost 10% of the market’s POS terminals. In Turkey, while Garanti Bank, the market’s second largest issuer by card numbers in 2009, continues to lead in contactless innovation and is launching an NFC-enabled SIM card this year, both Akbank and emerging card force Bank Asya are pursuing growth through innovative contactless products in 2010.

Bank Asya launched the market’s first contactless open-loop prepaid card, DIT Pratik, in late 2009. Contactless acceptance in Turkey is expanding in urban areas and is expected to continue as issuing banks compete for the market’s growing young urban consumer segment.
Note: World growth figures based on 44 researched major markets. Contactless figures include prepaid transportation cards

Critical mass in contactless issuance building in France, UK

Western Europe has also seen growth in contactless technology and usage this year. France’s Carrefour SA retailer became a driver of contactless payments in the French market in 2009 when its financial services subsidiary, Société des Paiements PASS (S2P), converted its several-million-card Carrefour PASS store card portfolio to contactless MasterCard PayPass cards.

Carrefour is expected to have installed over 20,000 contactless-enabled POS terminals in its French retail outlets by mid-2010; according to company statements, in December 2009, 38% of PASS cardholders making purchases under 25 Euro used the contactless feature.

If Carrefour achieves its dual-pronged PASS contactless strategy of both competing more directly with large bank issuers and decreasing wait times for its customers at its outlets in the French market, it could be expected to expand contactless programmes to its other card issuing markets, including Italy, Belgium and Brazil.

In the UK, while growth in contactless cards in issue reached over 80% in 2009 due to Barclaycard’s active efforts to replace its regular Chip-and-PIN credit cards with contactless cards, it appears that critical mass in issuance is still needed to bring major retail and foodservice chains on board to contactless acceptance.

While current contactless accepting merchants include notable high-frequency-visit, low-value-purchase chains such as Caffè Nero Group Plc (11% share in UK specialist coffee shop sales in 2009), Pret a Manger Europe Ltd (1.7% share in UK fast food sales in 2009) and as of June 2010, a number of Alliance Boots Plc’s pharmacy outlets (50.2% share in UK health and beauty specialist retail sales in 2009), a major retailer the likes of Carrefour has yet to sign on.

Nonetheless, it could be expected that if the Boots contactless trial is successful and Barclays’ rate of contactless conversion pushes forward through 2010, UK retail leader Tesco Plc or J Sainsbury Plc could make a similar move as French counterpart Carrefour. Tesco is particularly well placed to launch its own contactless product as it continues to expand its Tesco Bank financial services arm.