The introduction of EMV-compliant chip cards and technology will significantly expand the market for electronic funds transfer at the point of sale (Eftpos), according to market analysis firm Frost & Sullivan.
The Europay Mastercard Visa (EMV) standard ensures that single terminal and card approval processes are developed at a level that will allow cross payment systems, driving global interoperability of all smart card payments.
According to regulations proposed by EMV, it will be mandatory for all Eftpos terminals to read chip-based and smart payment cards by January 2005. As a consequence, many end-users are likely to replace their older, non-EMV compliant terminals, says Frost & Sullivan. It is forecast that at least 40 per cent of Europe's terminals will require replacing over the next three to four years.
The research firm also points to increasing use of smart cards in all European countries as having a positive impact on the Eftpos market. The assurance of higher security offered by chip-based payment cards over magnetic-strip cards have dictated that current terminals be replaced with smart card technology capable of reading and accepting chip-based payment cards.
The standardisation of terminals will also provide smaller vendors with the opportunity to penetrate other country markets and compete across borders with larger vendors. These smaller vendors had earlier experienced difficulties in offering products complying with varying market requirements in different European countries.
Michelle Bone, research analyst at Frost & Sullivan, warns however, that there still remains a question mark over the widespread acceptance of smart card technology, with many end-users still undecided about the electronic purse. Factors such as security, appeal and acceptance, data privacy and standards still pose a major concern, she says.
In addition to EMV migration, merchant and acquirer demand for greater functionality on Eftpos terminals - including ease-of-payment to consumers, assistance in stock control, and monitoring of customer buying patterns - are expected to boost the market.
“More immediately, the introduction of euro notes and coins is projected to drive the Eftpos market," says Bone. "Here, the need to convert currency to the euro will require the rollout of an update of Eftpos terminals. This might merely involve upgrading the terminals with software, while low memory and limited processing power might necessitate the full replacement of terminals.”
In contrast, according to Frost & Sullivan, the mobile Eftpos market is still in its development stage. Issues of security, flexibility, faster transaction times, and lower terminal installation and operational costs are expected to drive this market in the future. These systems are likely to find widespread use in the restaurant and retail home delivery sector, says the research firm.