Wifi Revolution

If your idea of the perfect world includes the ability to pay for your retail purchases by waving a cell phone or card in front of a sensor, you’ll appreciate a new report out today by industry analysis firm ABI Research (News - Alert).

 

Some of the world’s largest credit card associations, banks, wireless operators and merchants are now investing money in contactless payment hardware and software, ABI reports, and that investing will continue to grow now through 2011.

 

In fact, the research firm predicts that five years hence, spending on contactless systems will reach $870 million, up from $260 million this year. That represents an compound annual growth rate of 27 percent.

 

What are the drivers for contactless payment systems? ABI sees two key applications serving to motivate adoption of the technology: proprietary transportation ticketing, and open credit/debit/e-purse payments tied to financial service networks.

 

Currently, the majority of contactless payment systems are used for transportation ticketing. That will change in the next few years, ABI predicts, with open systems payments taking the lead.

 

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

Of course, as with any new technology, some companies and industry segments will be more eager to jump on board than others. Adoption also will occur faster in some areas of the world, and slower in others, ABI said.

 

“In North America, open system payments are driving the contactless adoption,” Collins said in the report. “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.”

 

Collins added that adoption of the technology in Japan and South Korea is aided by the fact that infrastructure foundations already exist there for transportation ticketing applications. Plus, as is often the case, mobile handset technology in Asia is more advanced than in the U.S. and Europe; contactless payment enabled phones already are widely available in the region.

 

The inclusion of contactless payment technology in mobile handsets is a key element of adoption in the U.S. and Europe, ABI noted. Debates are still ongoing regarding how payment applications will be deployed and managed on handsets, and this has delayed the introduction of contactless payment-enabled phones.

 

It takes time, of course, for any new technology to become widely used, and contactless payment systems are no exception. The ball now does seem to be rolling, though, toward solid business cases for employing the technology, and consumer demand for it.

 

“Technology and business issues must be resolved to see open systems on mobile handsets and accepted at existing contactless-equipped transportation installations,” ABI said in its report. “In addition, consumers have to be comfortable with the use of the technology and confident in the security of contactless payments.”

 

It seems likely that both these challenges will be overcome, in time.

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