1. Contactless, Mobile, Online and Prepaid in the UK
Key to the future growth of payments players will be their positioning with regards to new payment
technologies as they continue to develop and evolve.
Features and benefits
Understand the challenges facing contactless cards including the hardening of consumer
attitudes against the technology
Effectively plan a mobile strategy by understanding where competitors stand in the market, and
consumer attitudes towards mobile payments
Gain impartial insight into the industry through interviews with more than twenty senior industry
insiders, both on and off the record
Stay competitive with detailed consumer insight of the growing online payment market together
with exclusive insight as to expected changes
Plan and develop new prepaid strategies with market sizing and high level insight as to
developments within the sector
Highlights
There are an estimated 20 million contactless cards in issue in the UK. Despite strong promotion by Visa
and Barclays, contactless has yet to attract a critical mass of merchants, although growing numbers are
finally signing up. Crucially, consumers remain unconvinced, with contactless cards little used and little
desired
General purpose reloadable (GPR) cards will remain a growing (albeit specialized) area of the payments
market, and are now in the pockets of 5.5 million consumers.
Mobile proximity payments have taken a significant step, with live products in the market. Mobile proximity
payments are gaining attention in the UK following the release of the Orange Quick Tap phone in 2011.
While the sector has taken great strides, it suffers from negative consumer perception, and as of yet no
major critical mass successes.
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Report Details:
Published: July 2012
No. of Pages: 74
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2. Table Of contents
OVERVIEW
Catalyst
Summary
EXECUTIVE SUMMARY
Contactless payment providers need to convince consumers
Consumers have had mixed experiences with contactless cards, with little enthusiasm for further rollout
Prepaid in the UK grows beyond core market
5.5 million consumers in the UK hold prepaid cards
Mobile proximity payments have yet to gain consumer attention
Mobile proximity payments are important to the industry, but consumers are yet to be convinced
Online payments continue to grow
Cash leads the way in online payments
CONTACTLESS PAYMENTS HAVE NOT CONVINCED
Overview
Contactless technology has several uses
Contactless card issuance is growing
Barclays Group is leading the market in contactless card issuance
Visa goes long on contactless
UK retailers are slowly but steadily rolling out contactless acceptance
Consumers remain apathetic to contactless usage in the UK
Only 5% of consumers have and use a contactless card
Contactless may lack added value for many consumers and merchants
There has been a mixed experience for consumers with contactless cards, with little enthusiasm for
further contactless rollout
Only one third of consumers who do not hold a contactless card are interested in the concept
Consumers 34 years old and under account for nearly 60% of contactless card users
There is a gender gap in contactless card usage
Usage of open loop contactless cards in transportation is likely to facilitate wider growth in contactless
payments
The challenges for making open loop contactless work on TfL's network have mostly been overcome
The Olympics is being used as a significant platform for contactless payments
Expectations for the future
PREPAID IN THE UK IS GROWING BEYOND ITS CORE MARKET
Overview
Prepaid cards exist in a variety of forms, targeted at specific audiences and needs
GPR cards can be split between core cards and conduit cards
Prepaid cards require a variety of players in the value chain
The role of the program manager
The role of the issuer
The role of the processor
The role of the program manager is in decline
3. The second Electronic Money Directive came into play in 2011
GPR cards have a variety of revenue streams
The necessary fees on GPR cards limit uptake
5.5 million consumers in the UK hold prepaid cards
Key players in the GPR market include Cashplus and Virgin
Cashplus is targeted at consumers with credit problems
By contrast, Virgin's success is strongly driven by its branding
Consumers report they predominantly use their prepaid cards for online spending or to give as gifts
The gift card sector remains an important part of the prepaid sector
The government sector represents considerable opportunity for prepaid
Brazil has used prepaid cards as a means of economic development
GPR cards are more attractive to the 25–34 market
Most consumers do not see the need for GPR cards, but fees are not the key factor
There are four conditions necessary for GPR to become a mainstream payment method
Prepaid cards can benefit from a targeted audience
MOBILE PROXIMITY PAYMENTS HAVE YET TO GAIN CONSUMER ATTENTION
Overview
Proximity payments sit alongside P2P and m-commerce as a key form of mobile payment
MNOs remain key players in the mobile payments market
Orange has first mover advantage
Quick Tap can now be topped up any credit/debit card
O2 has released the O2 Wallet to market
Project Oscar has been threatened by a European Union probe
Visa is launching V.me in 2012
MasterCard is launching the PayPass wallet in 2012
Technology players also report they intend to enter the UK in 2012 or 2013
PayPal has been active in the mobile wallet sphere
Barclays has entered the P2P market with the launch of Pingit
Barclaycard is also active in the mobile payments market
Consumers remain unconvinced by mobile proximity payments
Younger consumers are more open to mobile proximity payments
There is a slight gender gap in mobile NFC interest
Over two thirds of UK consumers claim they are uninterested in location-based offers
Datamonitor's proprietary NFC Adoption Model shows room for growth
The NFC Adoption Model identifies three target consumer groups for NFC based on current behavior
Less than 1% of UK consumers are likely to immediately take up NFC
Contactless could pave the route for mobile proximity payments
ONLINE PAYMENTS CONTINUE TO GROW
Overview
The UK remains the third largest online market globally
There is significant potential in the UK for online transactions
Cards lead the way in online payments
PayPal's penetration in the UK is double the global average
Flights and hotels are the largest merchant categories by value
4. Online shopping increases with education levels but remains high overall
Consumers that do not shop online do so because of convenience and worries about online fraud
APPENDIXSUPPLEMENTARY DATA
(Untitled section)
Contactless
Prepaid
Online
Mobile
Definitions
Credit card
Debit card
ePurse/eWallet
Interchange
Merchant service charge (MSC)
Point-of-sale (POS) terminal
Methodology
Cards and payments database
Datamonitor's Financial Services Consumer Insight Survey has been expanded, providing improved, new,
and valuable insight
Forecasting methodology
Further reading
Ask the analyst
Datamonitor consulting
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