We have been closely monitoring the financial services market for the last 5 years. There are many fintech buzzwords currently circulating in the industry — contactless payment is one of the most exciting one that is worth knowing about. Why?
According to a recent report on the Contactless Payments market, it is one of the most explosive fintech territories, garnering massive yearly growth since 2016. In 2016, the US Contactless payments market alone generated $29 Billion annual revenue, which is now projected to touch $111 billion by end of 2021. By 2025, the report projects the contactless payments industry to be close to $400 billion (~$358 billion).
According to Juniper Research data, the global contactless payments market is evaluated at $482 billion, and the number is likely to cross $500 billion by end of 2021. There is a big possibility of fintech payments markets based on contactless transactions crossing $1 trillion by 2025.
China, Far East, India and Latin America are the biggest markets, in terms of the user base, for contactless payments vendors and gateway service providers. In fact, India is already leading the transition from physical currency to digital payments since it adopted demonetization to prevent cash transactions. According to Accenture report, approximately US$ 270.7 billion in transactions worth US$ 66.6 billion are projected to move from cash to cards and digital payments in India by 2023 and expand further to US$ 856.6 billion by 2030
With no signs of retreat from the COVID-19 virus, contactless payments has opened new avenues for merchants and shoppers to adopt contactless payments. The use of physical currency could well be out of practice in the coming months.
In this fintech primer, we will define the meaning, scope and applications of contactless payments.
What is Contactless Payments: Definition and Scope
Any payment transaction that is carried out using a contactless chip, QR codes and smartphone wallets can be categorized as part of the contactless transaction.
Chip-enabled Technology using Radio / RFID Tags
Gartner defines contactless payments as a technology-driven transaction enabled “via a contactless chip embedded in payment cards, tags, key fobs and mobile phones.”
It also provides an overview of how this works.
Gartner states: “The chip communicates with a reader device that uses radiofrequency or Near Field Communication (NFC) standards. It includes radio frequency identification (RFID) as part of a machine-to-machine communications trend. Contactless payments are more popularly referred to as “wave and pay” or “tap and go.””
Contactless payment is a secure payment method using a debit or credit card, smartcard, or another payment device by using RFID technology and near-field communication. (Source: Julia Kagan / Investopedia)
It is also referred to as tap-and-go payments mode where the merchant prompts the customer to complete the payment transaction by either tapping the card or by electronically enabling a device to use information from the chip-based card linked to a wallet or bank card or account.
Morten Hofstad, Head of APAC at MYPINPAD comments: “As the first provider in the world to be globally certified by PCI to accept payments on smart devices without additional hardware, we’re delighted to mark another milestone by being the first to be certified in the incredibly dynamic Australian market.
The APAC region is a hub of innovation for payments and we’re thrilled to gain certification from AusPayNet. We are about to unlock opportunities in seamless payments and customer experience for thousands of merchants in the region and have our first six deployments lined up to go live this year, and we look forward to many more in 2022.”
Why use contactless payments?
Contactless payments are considered as the safest, most secure and user-friendly compared to currency transactions done physically. Contactless payments can be done by using online payments exchanges, smartphone, QR Codes, or using your Debit / Credit card information. Not many would agree, but we think that the maturity of blockchain-based cryptocurrency transactions have positively influenced the adoption of contactless payments across the world.
Here’s a quick overview of the benefits of using Mastercard for contactless payments.
Top Market Players that Provide Contactless Payments Technology
- Apple Pay
- PAX Global
- Virgin Money
- Samsung Pay