Contactless Payments: Replacing Cash with Convenience

May 23, 2003

Abstract

Boston, MA, USA May 23, 2003

Contactless payments, specifically RFID, are presenting banks with an opportunity to capture a significant portion of a traditionally cash-based market.

Contactless payments are increasingly seen as a solution to many of the problems that cash and payment cards present to industries where transaction times are crucial to business. Contactless payments can be fast and convenient, and they offer consumers tremendous flexibility in making purchases. Of the contactless payment technologies, radio frequency ID (RFID) is becoming the favorite in the payments world.

RFID presents several benefits to each party to a transaction. It gives merchants the ability to accept electronic payments without compromising transaction time. It gives customers the flexibility of making purchases quickly and without the hassle of carrying cash. It gives banks the opportunity to capture a piece of a cash-concentrated market through interchange fees.

"For payment providers, RFID is appearing at a time when spending is weak and competition is tight among issuers who are trying desperately to distinguish their cards from the multitude on the market today," says Ariana-Michele Moore, author of the report. "Large associations like American Express, MasterCard and Visa, as well as banks, are launching pilot programs in hopes in realizing a new opportunity."

Because the benefits of RFID are so enticing, Celent expects the technology to play an increasingly prominent role in payments. Considering that three of the top target retail outlets for RFID payments are quick service restaurants (QSRs), movie theaters, and movie and video game rental stores, RFID represents a significant revenue opportunity. In aggregate, 2002 US sales in all three were over US$160 billion. In 2007, we expect RFID payments to capture at least 8 percent of the revenue obtained by these three outlets.

The report offers readers a discussion of RFID and an overview of RFID payment programs on the market today.

A is available online.

of Celent Communications' Retail Banking research service can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

Boston, MA, USA May 23, 2003

Contactless Payments:  Replacing Cash with  Convenience

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INTRODUCTION 4
CONTACTLESS PAYMENTS 5
  RFID Technology 6
  RFID & Payments 9
  MASS Transit and RFID 10
  Banks, Payment Providers & RFID  12
INDUSTRY INITIATIVES 13
  American Express: Expresspay 13
  Bank Of America: Quickwave 15
  Commerce Systems: 2SCOOT 16
  EXXONMOBIL: Speedpass 18
  FREEDOMPAY: Private Label 20
  MASTERCARD: PAYPASS 22
ADOPTION DRIVERS 25
  Banks 25
  Merchants 27
  Consumers 29
FUTURE OUTLOOK 32

 

        

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