Contactless payments booming, as expected

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By: Wise Marketer Staff |

Posted on July 26, 2005

As predicted by ABI Research at the beginning of 2005, the number of contactless payment initiatives announced is on the increase, with consumers being given more and more chances to check-out more quickly and without using cash, even for small payments.

According to Erik Michielsen, director of RFID and ubiquitous networks for ABI Research, the firm's earlier forecast has not only proved correct but it was something of an understatement. The related market for near-field communications (NFC) is also seeing a surge in activity although, according to Michielsen, 2006 will actually be "the year of NFC".

Two new reports from ABI, entitled 'RFID Contactless Payments' and 'Near-Field Communications', examines these technologies and their out-growth into the consumer world.

RFID-based payments
Contactless payment systems (based on RFID technology) will benefit consumers, who simply spend less time queuing to check-out in shops, and find transactions easier. Michielsen noted: "The momentum in both of these markets is absolutely mind-boggling. Consumers enjoy using RFID, and quickly get comfortable with using it."

At the same time, these systems also benefit the merchants, who can serve more customers and see fewer walk away from long queues (trolley or basket abandonment is a bigger problem than is usually realised, particularly at peak shopping hours).

Return on investment
According to ABI Research, both RFID and NFC show a clear return on investment and, consequently, merchants, card issuers and card associations are all making commitments to contactless payment programmes.

For example, Chase Card Services is aggressively trialling its Blink card and other banks are expected to follow suit in due course. American Express has its Blue card, and drug store chain CVS is pushing its contactless system, joined by other major US retailers such as Walgreens, 7-11, KFC, McDonald's, and Regal Cinemas. Tens of thousands of reader terminals are already being upgraded to include contactless capabilities by ViVOtech and others.

Global interest
While the firmest commitments so far have been seen in North America, interest is also strong in Europe and the Asia-Pacific countries, because such technologies can be deployed anywhere in the developed world. Looking to the technology providers themselves, both RFID and NFC are well served. In fact, as Michielsen concluded, "Anybody who's looking at contactless payment is also looking at NFC. Examples include First Data Corporation, Giesecke & Devrient, GemPlus, Ingenico, Inside Contactless, JCB Co. Ltd., Philips, Sony, Texas Instruments, and ViVOtech."

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