Contactless cards have finally taken off in Europe with spectacular growth in the number of cards and the volume of payments during 2014.
The rollout of contactless cards and adoption of contactless-enabled terminals are set to accelerate in the coming years as new Visa and MasterCard mandates come into force in 2016. According to the study: Global Payment Cards Data and Forecasts to 2020, Europe is expected to witness a nine-fold rise in contactless payment volume by 2020 compared to 2014.
Contactless card numbers to treble by 2020
At the end of 2014, there were 223 million contactless cards in issue in Europe, up 65% compared to 2013, and representing 15% of all payment cards. Issuers see contactless as a way of persuading consumers to reduce their reliance on cash and to cut transaction times, and often issue replacement cards with contactless functionality. The report forecasts the number of contactless cards in issue to treble between 2014 and 2020 to just short of 700 million cards, representing more than 40% of the total regional card base.
Number of Contactless Cards in Europe (millions)
Global Payment Cards Data and Forecasts to 2020
The share of all cards that have contactless functionality varies widely across the region; at the end of 2014 no contactless cards at all had been issued in Denmark, Estonia, Lithuania, Norway or Sweden, whilst more than 60% of all cards in the Czech Republic, Poland and Slovakia were contactless.
The success of contactless in the Czech Republic and Slovakia is linked to the quick and co-ordinated efforts of banks in terms of both issuing and acquiring. In Poland meanwhile, card schemes have made particularly strong efforts to promote contactless cards which, coupled with a consumer base open to testing new technologies, has led to widespread issuance and acceptance of such cards.
Unclear business case and high costs have inhibited issuance in some countries
Sweden started to issue contactless cards only in 2015, with traditional cards already well established and consumers frequently using them for low-value payments. The business case for contactless payments is therefore lessened compared to markets where cards are typically only used for transactions above a certain value. The rollout of contactless cards has also been a relatively slow process in some other countries. In Russia, for example, owing to the high cost of converting cards to contactless, banks focused initially on issuing only premium and high-tier contactless cards.
Accelerated growth in usage as acceptance expands
According to the study, there were 1.4 billion contactless payments worth €15 billion in Europe in 2014, rises of 155% and 190% respectively compared to 2013. These are staggering increases, but contactless transactions still represent just 2% of the overall volume of card payments in the region and 0.5% of their value. The volume of contactless payments is forecast to rise almost nine-fold to 12.2 billion in 2020, by which point they will account for 13% of all card payments. The rapid growth in usage is a result of escalating acceptance and greater consumer familiarity with the technology, as well as industry campaigns.
Volume of Contactless Card Payments in Europe (millions)
Global Payment Cards Data and Forecasts to 2020
Card scheme mandates will boost contactless acceptance
There were 2.5 million contactless-enabled terminals in Europe at the end of 2014, representing 16% of all EFTPOS terminals in the region. MasterCard and Visa have both mandated that new terminals should be capable of accepting contactless transactions by the beginning of 2016 and all existing terminals should be contactless by the beginning of 2020 – the level of contactless acceptance is therefore set to soar for the rest of this decade.
The interchange fee for contactless cards in many countries is lower than that for other payment cards – this will also encourage growth in acceptance generally and in contactless acceptance in particular, as some retailers sign up to accept cards for the first time and others replace older terminals.
Tipping point for contactless is becoming closer
RBR believes that contactless will continue to spread throughout the region aided by the card schemes’ mandates for terminals to be capable of accepting contactless transactions. At some stage there will be a tipping point, after which the movement to contactless will be extremely quick. That point has not quite been reached, but it is becoming closer all the time.
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