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A Smart Time for Contactless
As 2006 came to a close, smart cards in the consumer card payments market had reached near full penetration in western European countries such as France and the United Kingdom. What was once a cutting edge technology is now a standard in the wallets of many Europeans.

In the United States, this market has struggled to gain a foothold. But, smart cards may now be getting a second chance in the form of contactless technology. The fast-paced American lifestyle continues to put pressure on retailers to serve customers in an ever-more efficient manner. At the same time, card brands such as MasterCard and Visa, are pushing for a bigger slice of the small-tickets payments pie traditionally reserved for cash. The time is finally right for large-scale penetration of smart cards in the payments market.

According to the new Packaged Facts report, Smart Cards in the U.S.: Contactless Payment Cards, roughly 27 million contactless payment cards were in circulation in the United States in 2006. If circumstances permit, that number could top 100 million by 2011. What’s more, increased penetration of contactless payments is expected grow transaction volumes and even managed balances for issuers.

This targeted report provides in-depth analysis of the small, but potentially large market for contactless payment cards in the United States. For perspective, it includes overviews of the overall smart card market worldwide and in the Untied States and the worldwide and U.S. payments markets. Also included are trends affecting the payments and contactless payments markets and analysis of consumer attitudes towards payment cards derived from the Annual Consumer Survey conducted by Simmons Market Bureau. To complete the report, an in-depth analysis of the potential market including forecasts of number of cards and increases in transaction and purchase volumes through 2011 is provided.

What You’ll Get in this Report.
Smart Cards in the U.S.: Contactless Payment Cardsmakes important predictions and recommendations regarding the future of this market, and pinpoints ways current and prospective players can capitalize on current trends and spearhead new ones. No other market research report provides both the comprehensive analysis and extensive data that Smart Cards in the U.S.: Contactless Payment Cards. offers.

Plus, you’ll benefit from extensive data, presented in easy-to-read and practical charts, tables and graphs.

How You Will Benefit from this Report
If your company is already doing business in the smart card and contactless market, or is considering making the leap, you will find this report invaluable, as it provides a comprehensive package of information and insight not offered in any other single source. You will gain a thorough understanding of the current market for smart cards and contactless payments, as well as projected markets and trends through 2011.

This report will help:

Marketing Managers identify market opportunities and develop targeted promotion plans for smart cards and contactless payments.
Research and development professionals stay on top of competitor initiatives and explore demand for smart cards and contactless payments
Advertising agencies working with clients in the banking and retail industries understand the product buyer to develop messages and images that compel consumers to use smart cards and contactless payment options.
Business development executives understand the dynamics of the market and identify possible partnerships.
Information and research center librarians provide market researchers, brand and product managers and other colleagues with the vital information they need to do their jobs more effectively.

Chapter 1 Executive Summary

Scope of Report
Methodology
What Is a Smart Card?
Memory Chip
Microprocessor Chip
Smart Card Applications
Types of Smart Cards
Contact Smart Card
Contactless Smart Card
The Worldwide Market for Payment Smart Cards
582 Million Payment Smart Cards in Circulation Worldwide
U.S. Contactless Card Payments Market Still in Infancy
27 Million Contactless Payment Cards In Circulation
Table 1-1 Total U.S. Contactless Payment Cards, by Brand, 2002-2006 (in millions)
Figure 1-1 U.S. Market Share of Contactless Payment Cards, by Brand, 2006 (%)
Contactless Cards Attract More Transactions
Table 1-2 Estimated U.S. Transactions from Cards with a Contactless Feature, by Brand, 2004-2006 (in millions)
High Growth, Lower Value for Contactless Card Purchase Volume
Table 1-3 Estimated U.S. Purchase Volume from Cards with a Contactless Feature, by Brand, 2004-2006 (in million $)


Market Forecast
Total Contactless Payment Cards to Reach 109 Million by 2011
Table 1-4 Projected Total U.S. Contactless Payment Cards, by Brand, 2007-2011 (in millions)
Figure 1-2 Market Share Growth of Contactless Payment Cards, 2007-2011 (percent)
2011 Contactless Transactions Reach 2.2 Billion
Figure 1-3 U.S. Contactless-Enabled Payment Card Transactions, Contactless Versus Magnetic Stripe Transactions, 2007-2011 (in billions)


Marketing Dynamics
Contactless Product Introductions
Retailers a Driving Force in Contactless Integration
Top Financial Services Companies Ad Spend
Table 1-5 Selected Financial Services Companies Ranked By Total Measured U.S. Advertising Spending, First Half of 2006 versus First Half of 2005 (In Million $)
Selected Smart Card Marketing Initiatives
MasterCard Priceless Highlight Fun and Function of PayPass
MasterCard PayPass at a Sports Venue Near You
Visa Brings Life into Play
Visa Feels Consumer Pain With Lunch Spot

Consumers Urged to Blink with Chase VOD Campaign
Chase at Major League Ballparks
Product and Design Innovation to Explode
Corporate Landscape in Flux


The Consumer
Credit Card Brand Penetration
Table 1-6 Household Penetration Rates for Major Credit Card Brands, 2003-2006 (%)
Credit Card Brand Demographic Indicators
Younger Consumers: Financial Insecurity and Immaturity
With Age Comes Awareness
Issuer Tests and Trials Provide Insights Into Consumer Acceptance
Adopters Most Likely Young and High Household Income
MasterCard Study Points to Shifting Consumer Behavior
Chapter 2 The Smart Card Contactless Payments Market


Overview
Methodology
What Is a Smart Card?
Memory Chip
Microprocessor Chip
Smart Card Applications
Types of Smart Cards
Contact Smart Card
Contactless Smart Card
RF Technology Versus RFID Cards
The EMV Standard
The Market for Smart Cards
The Worldwide Market for Smart Cards
Worldwide Shipments of Smart Cards Tops 3 Billion Units
Table 2-1 Total Worldwide Smart Card Shipments, by Type, 2002-2006 (units in millions)
Payment Smart Cards Account for 9% of Worldwide Shipments
China’s National ID Program Drives Identification Segment Shipments
Figure 2-1 Worldwide Market Share of Smart Card Shipments, by Type, 2006 (in millions)
The U.S. Market for Smart Cards
U.S. Smart Card Shipments Total 199 Million Units
Table 2-2 U.S. Versus Worldwide Smart Card Shipments, 2002-2006 (units in millions)
Figure 2-2 U.S. Market Share of Worldwide Smart Card Shipments, 2002-2006 (%)


The Market for Payments
The Worldwide Market for Payment Cards
Total Payment Cards in Circulation Tops 2.5 Billion Units Worldwide
Table 2-4 Number of Payment Cards in Circulation Worldwide, by Brand, 2002-2006 (in millions)
Figure 2-4 Worldwide Market Share of Payment Cards, by Brand, 2006 (%)
The U.S. Market for Payments
Metric Mania
U.S. Credit/Debit Card Purchase Volume Approaches $2.8 trillion
Visa Accounts for Nearly Half of Purchase Volume
Table 2-5 Total U.S. Payment Card Purchase Volume, by Brand, 2002-2006 (in billion $)
Figure 2-5 U.S. Market Share of Payment Card Purchase Volume, by Brand, 2006 (%)
Consumers Increasingly Prefer Credit/Debit Cards
Table 2-6 Payment Card Share of Personal Consumption Expenditures, by Brand, 2005 and 2006 (%)
Figure 2-6 Payment Card Share of Personal Consumption Expenditures Versus Total PCE, by Brand, 2006 (%)
Total Cards in U.S. Circulation at 969 Million
Table 2-7 U.S. Payment Cards in Circulation, by Brand, 2002-2006 (in millions)
Figure 2-7 U.S. Market Share of Payment Card Purchase Volume, by Brand, 2006 (%)
Total Payment Transactions Top 48 Billion
Table 2-8 U.S. Payment Card Transactions, by Brand, 2002-2006 (in billions)
Figure 2-8 U.S. Market Share of Payment Card Transactions, by Brand, 2006 (%)


The Worldwide Market for Payment Smart Cards
582 Million Banking and Payment Smart Cards in Circulation
MasterCard Leads Globally
Table 2-9 Banking and Payment Smart Cards in Circulation Worldwide, by Brand, 2002-2006 (in millions)
Figure 2-9 Worldwide Market Share of Banking and Payment Smart Cards, by Brand, 2002-2006 (%)
MasterCard Surpasses Visa in Smart Card Share
Table 2-10 Percentage of Smart Cards to Total Cards Worldwide, by Brand, 2002-2006 (%)


The U.S. Market for Smart Card Contactless Payment
For Payment Smart Cards, It’s Contactless
Why Contactless Payment Cards Haven’t Stuck
Less Fraud, Less Need
Substantial Fragmentation
Contactless Card Payments Market Still in Infancy
Table 2-11 U.S. Contactless Payment Cards in Circulation, by Brand, 2002-2006 (in millions)
Figure 2-11 U.S. Market Share of Contactless Payment Cards, by Brand, 2006 (%)
Contactless Cards Attract More Transactions
Shift in Consumer Interest
Table 2-12 Estimated U.S. Transactions from Cards with a Contactless Feature, by Brand, 2004-2006 (in millions)
Figure 2-12 Percentage of U.S. Transactions from Cards with a Contactless Feature, by Brand, 2004-2006 (%)
High Growth, Lower Value for Contactless Card Purchase Volume
Table 2-13 Estimated U.S. Purchase Volume from Cards with a Contactless Feature, by Brand, 2004-2006 (in million $)
Figure 2-13 Percentage of U.S. Purchase Volume from Cards with a Contactless Feature, by Brand, 2004-2006 (%)
Total Contactless Payment Cards to Reach 109 Million by 2011
Table 2-14 Projected Total U.S. Contactless Payment Cards, by Brand, 2007-2011 (in millions)
Table 2-15 Projected Total U.S. Payment Cards, by Brand, 2007-2011 (in millions)
Figure 2-14 Market Share Growth of Contactless Payment Cards, 2007-2011 (%)
Contactless Cards to Rev Up Transactions, Slow Purchase Volume Growth
Table 2-16 Total U.S. Payment Card Transactions and Purchase Volume, 2007-2011
2011 Contactless Transactions to Reach 2.2 Billion
Figure 2-15 U.S. Contactless-Enabled Payment Card Transactions, Contactless Versus Magnetic Stripe Transactions, 2007-2011 (in billions)
Chapter 3 Factors to Growth


Educate Consumers on Convenience and Safety Factors
Safety May Not Be a Major Consumer Impasse
Politicians Cry Wolf on Safety
Security Measures are Already There
Retail Acceptance Increasing
Expanding Definition of Retail Acceptance
Merchant Benefits … and Costs
Added-Value Contactless
Is Direct Mail Smart for Smart Card Payments?
Table 3-1 Growth of U.S. Card Solicitations, 1998-2006 (in billions)
Direct Mail Relevancy Questioned
Beware The Do-Not-Mail Movement
Population Growth = Potential Customers
Reach Out to Minority Populations
Table 3-2 Purchasing Power of U.S. Minorities: 1990, 2000, 2005 and 2010 (in billion $)
Gross Domestic Product
Figure 3-1 U.S. Quarterly GDP, Q1-2001- Q3-2006 (in billion $)
Interest Rate Dilemma
Greater Disposable Income
Table 3-3 U.S. Population’s Personal Income and its Disposition, 2004-2005
Table 3-4 U.S. Population’s Personal Income and its Disposition, 2006 (April-November)
Consumers May Immediately Mobile-ize
Near Field Communications (NFC) and Mobile Device Payments Chapter 4 Marketing Dynamics

Overview
Retailers a Driving Force in Contactless Integration
Can Old Card Users Learn New Tricks?
Advertising Spend of Major Credit Card Marketers
Selected Advertising Expenditures of Financial Services Category
Table 4-1 Top 5 Megabrand Ad Categories, Ranked by Total Measured U.S. Advertising Spending for First-Half 2005 Versus First-Half 2006 (in million $)
Top Financial Services Companies’ First-Half 2006 Ad Spend
Table 4-2 Selected Financial Services Companies, Ranked by Total Measured U.S. Advertising Spending, First-Half 2005 Versus First-Half 2006 (in million $)
Top Financial Services Companies’ Total 2005 Ad Spend
Table 4-3 Financial Services Companies in Advertising Age’s Top 200 Advertisers, 2005
AmEx Ad Spend Increases Following Supreme Court Ruling
Print Trumps Internet in 2005 Ad Spend


Selected Smart Card Marketing Initiatives
Many Marketers Still in the Pilot Plan Stage
Expansive Partnerships Often Involved
Pilots Continue, But Skeptics Remain
MasterCard Leadership Threatened?
MasterCard Highlights Fun and Function of PayPass
Table 4-4 Top 10 Preferred New Television Advertisements, Airing February 5-March 4, 2007
MasterCard PayPass at a Sports Venue Near You
MasterCard Sweepstake Offer Specialized for PayPass Users
Smart Cards and Small Business Card Market
Visa Launches Prepaid Contactless Program
Visa Brings Life into Play
Visa Feels Consumer Pain with Lunch Spot
Consumers Urged to Blink with Chase VOD Campaign
Direct Mail Losing Direction
Chase at Major League Ballparks
Beware the Backlash


Selected Smart Card Product and Design Innovations
Form and Function: Design Innovations
An Open Market for Ancillary Products
Purchase with a Flick of the Wrist in Taiwan
Technology Vendors Go Smaller
Manufacturing Innovations Focus on Security
Will Biometrics Replace Smart Card Technology?
Pay By Touch, Leader in Biometrics
Chapter 5 Corporate Landscape and Profiles


Overview
Corporate Landscape and Significant Industry Events
Interchange Fee Suits
Ramifications of Antitrust Suit
Senate Judiciary Committee and Interchange Fees
American Express and Discover Sue the Associations
Corporate Profiles of Credit Card Brands
Overview
A Note on Metrics


MasterCard
Overview
History
MasterCard’s IPO
Performance
Figure 5-1 Estimated Total U.S. Revenues for MasterCard, 2002-2006 (in million $)
Other Metrics
Table 5-1 Key U.S. Metrics for MasterCard, 2002-2006
MasterCard’s PayPass


Visa USA
Overview
History
Reorganization and Initial Public Offering
Performance
Figure 5-2 Estimated Total U.S. Revenues for Visa, 2002-2006 (in million $)
Other Metrics
Table 5-2 Key U.S. Metrics for Visa, 2002-2006
Visa Contactless
Small-Ticket Transactions to Drive Contactless Adoption
Table 5-3 Visa Small-Ticket Purchase Volume, 2000-2006 (in billion $)
Visa Tests Smart Card ID Waters


American Express
Overview
History
1990s: a Time for Reinvention
Competition Heats Up
Performance
Figure 5-3 Estimated Total U.S. Revenues for American Express, 2002-2006 (in million $)
Other Metrics
Table 5-4 Key U.S. Metrics for American Express, 2002-2006
AmEx ExpressPay


Discover Financial Services
Overview
History
Discover Spin-Off
Performance
Figure 5-4 Estimated Total U.S. Revenues for Discover, 2002-2006 (in million $)
Other Metrics
Table 5-5 Key U.S. Metrics for Discover, 2002-2006
Discover’s Contactless Program
Discover Tests Healthcare Waters


JCB International, Inc.
Overview
History
Performance
Figure 5-5 Estimated Total U.S. Revenues for JCB, 2002-2006 (in million $)
Other Metrics
Table 5-6 Key Worldwide Metrics for JCB, 2002-2006
JCB’s Smart Card Program
J/Speedy
JCB Offica


Corporate Profiles of Banks and Other Issuers
Overview


Bank of America
Overview and Brief History
MBNA & U.S. Trust Purchases
Performance and Other Key Metrics
Table 5-7 Key U.S. Metrics for Bank of America, 2004-2006
BofA/MBNA Contactless


JPMorgan Chase
Overview and Brief History
Performance and Other Key Metrics
Table 5-8 Key U.S. Metrics for Chase, 2004-2006
Chase Blink


Citigroup
Overview and Brief History
Largest MC Issuer Became an AmEx Issuer
Performance and Other Key Metrics
Table 5-9 Key U.S. Metrics for Citigroup, 2004-2006
Citigroup’s Contactless Partnership with MasterCard


Wells Fargo
Overview and Brief History
Performance and Other Key Metrics
Table 5-10 Key U.S. Metrics for Wells Fargo, 2004-2006
Wells Fargo and Visa Signature Contactless Cards


HSBC North America
Overview and Brief History
Performance and Other Key Metrics
Table 5-11 Key U.S. Metrics for HSBC, 2004-2006
HSBC Begins Full issuance of Contactless Debit Cards


Citizens Financial Group
Overview and Brief History
Performance and Other Key Metrics
Table 5-12 Key U.S. Metrics for Citizens Financial Group, 2004-2006
Citizens Becomes Largest Contactless Debit Card Issuer


Key Bank
Overview and Brief History
Performance and Other Key Metrics
Table 5-13 Key U.S. Metrics for Key Bank, 2004-2006
Contactless Debit Cards


GE Money
Overview and Brief History
Performance and Other Key Metrics
Table 5-14 Key Metrics for GE Money, 2004-2006
GE Money Issues Meijer-Branded MasterCard


Advanta
Overview and Brief History
Performance and Other Key Metrics
Table 5-15 Key U.S. Metrics for Advanta, 2004-2006
First Contactless Business Credit Card
Chapter 6 The Consumer


Introduction to Simmons Market Research Bureau Data
Credit Card Brand Penetration
Figure 6-1 Consumer and Monthly Credit Card Balances, by Balance Carried, 2006 (%)
Table 6-1 Household Penetration Rates for Major Credit Card Brands, 2003-2006 (%)
Credit Card Brand Monthly Usage Rates
Table 6-2 Household Usage Rates for Major Credit Card Brands, 2006 (%)
Credit Card Brand Demographic Indicators
Age Makes a Difference
Table 6-3 Demographic Indicators for Major Credit Card Brands, 2006

Whites and Asians Show Preference
Higher Education, Higher Income, White Collar Work, Two-Person Households and Home Ownership
Financial Attitudes by Age and Household Income
Younger Consumers: Financial Insecurity and Immaturity
Consumers Age 55+: With Age Comes Awareness
Table 6-4 Consumer Responses to Financial Attitudinal Statements, by Age, 2006
More Money, More Secure and Informed
Table 6-5 Consumer Responses to Financial Attitudinal Statements, by Household Income (HHI), 2006


Consumer Reaction to Contactless
Issuer Tests and Trials Provide Insights Into Consumer Acceptance
Are More Consumers Ready to Embrace Contactless?
Adopters Most Likely Young and High Income
Fast and Easy, Once Consumers Learn About It
MasterCard Study Points to Shifting Consumer Behavior
Consumer Point of View on BioPay


Selected Addresses of Players in the Contactless Market
Bankcard Associations and Issuers
Smart Card Component Suppliers