Interoperability is key to growth of contactless card market - Frost & Sullivan

Interoperability is key to growth of contactless card market - Frost & Sullivan

A mishmash of standards for contactless smart cards is likely to restrain the growth of the technology at the point-of-sale, according to the latest market analysis from Frost & Sullivan.

The consultancy says 121.7 million contactless smart cards were shipped in 2004, and this figure is expected to reach 847.3 million in 2009.

But, according to the research, interoperability of terminals is essential if the technology is to meet expectations for growth. Even the ISO 14443 - the most prominent standard - has Type A and Type B varieties so there is very little cohesion in operation.

Frost & Sullivan says international standards have to be worked out to enable terminals to accept payment through contactless mode, irrespective of the issuer.

Earlier this month a key deadlock was broken when MasterCard and Visa announced an agreement to share a common communications protocol based on the MasterCard PayPass ISO/IEC14443 Implementation Specification and associated testing requirements.

Vihar Bhagwat, analyst at Frost & Sullivan, says a tendency to persist with current systems, even if they are faulty or inadequate, will hinder adoption of contactless systems, particularly in Europe.

"With the January, 2005 EMV deadline for Europe, much of the infrastructure has been recently upgraded or is in the process of being done so, further reducing the contactless payment potential there," says Bhagwat.

But, in spite of hurdles, the technology is increasingly being used for transit systems, such as the Oyster card in London. Projects to replace smart and magnetic stripe cards in Taiwan, France and other parts of the world with contactless smart cards are also underway.

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