The contactless payment market size exceeded $40 billion in 2019 and is estimated to grow at 15% CAGR from 2020 to 2026. The global industry shipments are projected to reach 15 billion units by 2026, as growing demand from consumers and merchants to reduce transaction and billing time propels market growth.
Traditional banks lost around 20% of their millennial clients in 2019, highlighting the disconnect between millennials and traditional banks. Millennials prefer to partner with banks that can relate to their needs and act as trusted advisors that can provide a meaningful, contextual, and personal engagement.
Millennial consumers are also prepared to work outside a traditional financial setup when they find that the experiences working with such companies are better. Millennials are embracing contactless payments and care less about visiting brick and mortar branches or ATMs, driving the market demand for contactless POS terminals.
Safety and security of transactions is the primary concern of consumers and merchants. The players in the payment ecosystem are focusing on improving the safety and security of contactless payment by integrating 128-bit and 256-bit encryption in the payment methods.
Advancements in networking infrastructure
Ongoing advancements in networking infrastructure and rising government initiatives for the development of smart solutions are the key industry driving factors. Several government administrations are encouraging their merchants to adopt advanced payment solutions.
For instance, the Government of Australia is insisting retailers to adopt POS systems for contactless debit card transactions, as a result, since 2018 more than 90% face-to-face transactions made in the country were contactless.
The Australia and New Zealand (ANZ) contactless POS terminals market is predicted to register over 17% growth rate through 2026.The rapid shift toward advanced POS terminals will push the adoption of contactless payment solutions. According to Security Technology Alliance and Visa, Inc., more than 70% of the U.S. market players have POS terminals that are hardware-capable for contactless payments.
Growing adoption of NFC payment globally
The NFC technology segment accounted for around 60% of global market revenue share in 2019 owing to the extensive usage of NFC technology, facilitating real-time transactions. Growing penetration of NFC-based mobile handsets is contributing to the NFC-based contactless payment market growth. The technology provides short-range communication between electronic devices, providing a high degree of customer satisfaction and experience and helps in fast-tracking connections. Demand for NFC-based contactless payment systems is growing from the transportation, retail, and healthcare industries.
Demand for contactless payments in Asia Pacific
The Asia Pacific contactless payment market will expand at 17% CAGR during the forecast timespan. Rapid adoption of contactless POS terminals in the retail industry is being witnessed. Contactless POS reduces transaction time and helps retailers to accelerate transaction process and reduce counter queues. Consumers also prefer contactless payment options. According to a Mastercard Survey, more than 68% of consumers in Asia Pacific prefer to shop at stores with contactless payment options. As a result, retailers are moving from traditional systems to contactless payment options.
In 2020, the COVID-19 pandemic has catalysed the widespread market adoption of contactless payments. As a result of the pandemic, retail stores have limited the number of consumers in their stores, improved their sanitisation regimen, and introduced social distancing markers. The pandemic will force retailers to implement protective measures and adopt contactless POS terminals within their stores.
Growing circulation of contactless cards in Europe
Europe held more than 25% of the industry shipments in 2019 and is anticipated to dominate the contactless payment market during 2020-2026 due to consistently growing electronic payment transactions in the region. Visa and Mastercard accounted for majority of electronic payment transactions and more than 85% of the transaction via payment cards in Europe were on these cards. The secured performance of smart card transactions along with payment solutions enabled by real-time and biometric will drive demand for contactless payments.
Robust growth of account-to-account payment systems at the POS terminals in countries including Russia, Denmark, Sweden, Italy, and Spain will further augment the regional demand for contactless payments. Moreover, favourable government regulations such as PSD2 and Open Banking are also contributing to the market growth.