Studie - Contactless, Mobile, Online and Prepaid in the UK

Introduction

With alternatives to cash payments finally beginning to gain traction amongst consumers, the UK market is poised for rapid developments in the contactless, mobile, online and prepaid card spaces. This report provides a snapshot of how these emerging sectors stand in 2010, including market shares, consumer attitudes, and new product innovations.

Scope

*In-depth analysis of the opportunity in contactless, mobile, online and prepaid payments in the UK.

*Outlines the latest developments within these markets, including prepaid market share data and other key product innovations.

*Real world insight into consumer attitudes and behaviour in online payments based on Datamonitor's Financial Services Consumer Insight Survey.

*Highlights the strategies of key market players and examines how these are likely to develop in the future.

Highlights

While contactless payments are gaining a higher profile, actual consumer usage remains very low. As of March 2010 there were 9 million contactless payment cards and 24,500 contactless POS terminals in circulation, however this accounts for less than 6% of all cards, and 2% of POS terminals.

Mobile payments remain in an early stage of development with no key player yet emerging. Mobile network operators however are now beginning to enter the payments space, via prepaid and credit cards, in an attempt to gain an early foothold in the market. Growth in the near term will stem from m-commerce and P2P payments.

Prepaid continues to be a high growth sector in the UK and is now beginning to gain visibility with a mass market audience. Traditionally appealing to non-standard consumers, prepaid corporate incentive and travel cards are likely to prove major avenues for growth in the coming years.

Reasons to Purchase

*Learn how the market is taking shape within the contactless, mobile, online and prepaid space, and what this means for your company.

*Analyse the case for where you should be investing and the potential risks and rewards of each of these rapidly evolving markets.

*Understand why these developments are so critical to the future of payments, and avoid being left behind by the competition.

Overview 1

Catalyst 1

Summary 1

Table of Contents 2

Table of figures 3

Table of tables 4

Alternative Payments Are Gaining Ground in the UK 5

Contactless Payments Are Coming, But Not Yet 6

Definition of contactless payments 6

Contactless cards offer speed and convenience to consumers 7

The potential opportunity for contactless cards in the UK is up to £97.4 billion 8

Petrol sales provide the most potential for contactless payments in the UK 9

Contactless payments are being driven by Oyster and Barclays in the UK 11

Oyster proves that UK consumers are willing to use contactless ticketing 12

Barclaycard is the driving force behind UK contactless payment cards 14

Mobile Payments Are Focused on m-commerce and P2P Transactions 17

Mobile payments can be divided into P2P, m-commerce, and NFC payments 17

Mobile commerce and P2P applications are growing 18

Card issuers and MNOs in the UK are teaming up for a likely future push into mobile payments 19

Orange and Barclaycard are explicitly planning to launch mobile payments by 2012 19

O2 also has a card up its sleeve 21

Online Payments Are Dominated by Debit and Credit 23

Credit and debit cards account for 85% of online transactions by value 25

The most frequent online shoppers are the most likely to pay by credit card 27

Consumers spend the most on airlines and hotels, but shop more frequently for DVDs and games 29

The top quintile of consumers account for at least half of all online sales in nearly every merchant category 32

Convenience is more important than security when shopping online 33

Prepaid Cards Are Growing Beyond the Underbanked 37

Unlike other payment cards, prepaid cards typically require a program manager 37

Prepaid cards exist in a variety of forms, targeted at specific audiences and needs 38

Revenue streams for prepaid cards are based on fees and float interest 41

The UK prepaid card market is dominated by small- to mid-size players 42

Fraud remains a concern for the UK prepaid market 43

Mid-size banks and building societies are the largest issuers of prepaid cards in the UK 44

Appendix 49

Supplementary data 49

Online payments 49

Prepaid 53

Definitions 53

AAGR 53

APACS 53

Average transaction value 53

Balances outstanding 54

Bank of England base rate 54

CAGR 54

Charge card 54

Credit card 54

Debit card 54

Decoupled debit 54

Float 55

Prepaid card 55

Methodology 56

Primary research 56

Secondary research 56

Further reading 56

Ask the analyst 58

Datamonitor consulting 58

Disclaimer 58

List of Tables

Table 1: Consumer reasons for using different payment tools 36

Table 2: Number and value of prepaid card transactions, 2008 47

Table 3: UK prepaid cards by number of cards in issue by brand and issuing group 47

Table 4: Value of cash transactions by transaction value band (£m) 49

Table 5: Contactless opportunity by sector (£m and %) 49

Table 6: Proportion of consumers in the EU27 that have shopped online at least once in the last three months, 2008 50

Table 7: Reasons for not shopping online, UK and global average (%) 51

Table 8: Value of online transactions by payment tool and quintile (£m) 51

Table 9: Value of online transactions by merchant category and quintile (£m) 52

Table 10: Prepaid cards by brands and issuer (000s), 2008 53

Table 11: Current relevant publications, 2009-10 56

Table 12: Future relevant publications, 2010 57

List of Figures

Figure 1: The addressable market for contactless payments is £97.4 billion 9

Figure 2: Petrol sales alone have an addressable market for contactless of over £60 billion 10

Figure 3: The top four merchant categories in terms of opportunity could benefit from contactless payments 11

Figure 4: The Barclaycard OnePulse card uses the Oyster logo, and London imagery 14

Figure 5: Barclaycard is heavily marketing contactless to both consumers and merchants 15

Figure 6: Barclaycard and Orange plan to launch a mobile payment service by 2012 20

Figure 7: O2 has launched the most high profile mobile-related payment tool to date 22

Figure 8: The UK is the most advanced market for online shopping in Europe 24

Figure 9: Over 40% of consumers who do not shop online prefer to get their goods the same day 25

Figure 10: Credit and debit account for 85% of online transactions by value in the UK 26

Figure 11: Consumers spent £20 billion on their credit cards online in 2009 27

Figure 12: Consumers who shop online the most use credit cards for 48% of transactions by value 28

Figure 13: The top 20% of online shoppers account for 72% of all transactions by value 29

Figure 14: There were 839 million online transactions by volume in 2009 30

Figure 15: Videos/DVDs/games, music, and food and drink account for 54% of all online transactions 31

Figure 16: Consumers spent £18 billion on airline tickets and hotels online in 2009 32

Figure 17: The top 20% of consumers account for at least half of online sales by value in all categories other than music 33

Figure 18: Higher perceptions of security do not lead to a higher market share 34

Figure 19: High perceptions of convenience lead to a higher market share 35

Figure 20: Prepaid cards consist of three primary players: program managers, issuers and processors 38

Figure 22: Prepaid cards are often targeted at very specific needs 41

Figure 22: With the highest brand awareness, Virgin and PayPal lead the prepaid cards market 45

Figure 23: The prepaid cards sector is dominated by four issuers, accounting for 75% of the market 46

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