SecurityWorldMarket

13/01/2021

Contactless payment market to grow by almost 20% by 2027

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The global contactless payment market size was valued at USD 1.06 trillion by transaction value in 2019 and is anticipated to expand at a compound annual growth rate (CAGR) of 19.8% from 2020 to 2027, according to Grand View Research. This shift in demand can be attributed to the mass adoption of the system by several sectors, including retail and transportation, thereby offering convenience to the customers.

Furthermore, the rising adoption of contactless technology by the users or customers for small value transactions is expected to drive the growth. The continuous enhancement in payment security technologies and innovation in products and services is strengthening the market growth. Contactless payments enable transactions to be carried out without any physical connection between a consumer’s payment device and point-of-sale terminal.

Mobile phone payments, key fobs, stickers, and cards are some of the devices used for conducting contactless payments. Technological innovations, such as contactless rings or bands, in the wearables segment, are expected to drive the market demand. Growing contactless technologies in various applications such as vending machines, ticketing, toll booths, and fuel stations are expected to boost the market growth over the forecast period.

Covid-19 impact insights

Contactless payments are anticipated to increase and become a more preferred method of payment amid the spread of Covid-19 as contactless payment methods require less physical interaction. However, a bulletin from the Bank for International Settlements (BIS) says that the risk of virus transmission by cash usage is lower compared with other frequently touched objects, such as PIN pads and credit card terminals. Grand View Research suggests that perceptions that cash could spread pathogens are expected to change the payment behaviour by firms and users irrespective of whether concerns are justified or not. Digital wallets or other smartphone-based payment interfaces have emerged as potential solutions for payments to prevent virus spread.

Current developments in digital payments have encouraged the use of contactless payments amid this pandemic. For instance, in April 2020, according to the analysts the Neobank Upgrade (U.S.) has launched the new contactless credit card available in digital form that supports Google Pay and Apple Pay mobile wallets. Furthermore, bank authorities and card networks in the U.S., Germany, Netherlands, Austria, and Hungary, among other countries have set higher transaction limits than usual for contactless payment methods. For instance, in April 2020, U.K. Finance Limited has increased the spending limit for contactless card payments from 30 pounds to 45 pounds. Therefore, the market is expected to stimulate, with the growing concerns over virus transmission via cash flows.

Device insights

In 2019, the smartphones & wearables segment accounted for around 59% of market share, in terms of the transaction value. The use of smartphones has drastically increased in daily activities. For instance, individuals now use smartphones to make payments at stores. Moreover, innovations in wearables such as payment bands and payment rings are expected to drive the demand over the forecast period.

Further, smart cards are expected to gain significant market share over the forecast period, owing to its easier usage as compared to that of PIN-based Euro Mastercard Visa (EMV) cards.

Security concerns

Customers are mainly concerned about security surrounding contactless payments, since there is often a fear of fraud. Companies attempt to address such issues by providing secure payment systems that are authenticated through passcodes. The latest technological advancements have led to the invention of new ways of authentication, such as fingerprint authentication, for contactless payments.

The security and fraud management segment is expected to expand at a CAGR of 21.7% over the forecast period. As transactions carried out through contactless payments are susceptible to fraud due to which individuals have become more conscious about using these systems. Prominent contactless technology providers, including Gemalto and Visa Inc., are continuously upgrading their security protocols to enhance the security management of the contactless payments. Enhanced security systems and product developments have urged consumers to adopt contactless payments.

Some of the prominent players in the contactless payment market and named by the researchers include Gemalto, Visa Inc., Giesecke & Devrient GmbH, Heartland Payment Systems, Inc., Verifone, Ingenico Group SA, On Track Innovations Ltd., Idemia, Thales Group and  Wirecard AG.


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