JULY 6, 2016 Mobile Payments: Supporting Europe’s … · · 2016-09-06Mobile Payments:...

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DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

Mobile

Payments: Supporting

Europe’s Move to a Cashless

Society

• In 2015, only 3% of in-store payments in Europewere conducted by mobile phones, according tomarketdatafirmGfK.

• Western Europe has the highest smartphonepenetration globally, and it has the necessaryinfrastructuretosupporttheuseofdigitalmoney.

• In 2016, more than 20% of Visa’s face-to-facetransactionsinEuropewillbecontactlesspayments,accordingtoVisaEurope.

• By2020,allpoint-of-sale (POS) terminals inEuropewillbeabletoacceptmobilepayments,accordingtoVisaEuropeandMasterCard.

D E B O R A H W EI N S W I G M a n a g i n g D i r e c t o r ,

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U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

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Mobile Payments: Supporting Europe’s Move to a Cashless Society In a number of European countries, consumers have rapidly adoptedcontactlesspayments.Somebanks,retailersandtransportationcompanieshave already gone completely cashless, no longer accepting cash at theirbranchesor at thePOS. Inmany countries,making face-to-facepaymentsusingasmartphoneinsteadofacardisthenextstepinthepathtoanear-cashlesssociety.

In this report,we lookat the scaleanddevelopmentofmobilepayments,with a focus on face-to-face payment options such as Apple Pay andAndroidPay.We consider the global context in termsof numberof usersandinfrastructureinmajorregions,beforeturningtoEuropeasanexampleof a Western market that is leading in the adoption of new paymenttechnologies.

MOBILEPAYMENTSVS.MOBILEPOS

Mobile phones have become an increasingly common tool formaking in-store payments, for banking and for buying online. The term “mobilepayment” covers all transactions—including peer-to-peer (P2P)transactions,billpaymentsandordering itemsfromane-commercesite—made using any type ofmobile phone. “Mobile POS,” on the other hand,referstoface-to-facepaymentsmadeusingasmartphoneortabletwhereintheuserpaysforaproductorserviceonthespot.

Essentially, mobile payment methods are differentiated according to themobilephone’sabilitytoworkwithdifferenttypesoftechnologies:

• Shortmessage service (SMS) payments, such as those enabled byM-PesainAfrica,canbemadeusinganymobilephone.

• Wirelessapplicationprotocol (WAP)payments includethosemadeviaPayPal aswell asQRcodepayments suchas thosemade through the

Mobilephoneshavebecomeanincreasinglycommontoolformakingin-storepayments,forbankingandforbuyingonline.

Source:ShutterStock

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Starbucks barcode-scanning payment app. These can be made usinganysmartphone.

• Near-field communication (NFC) payments, such as those made viaApplePayandSamsungPay,canbemadeonlywithsmartphonesthatenablethetechnology.

Mobile P2P money transfers and mobile bill payments are alreadyestablished payment methods globally, whereas mobile face-to-facepayments are still growing in terms of adoption, and so will see furtherdevelopments,accordingtoconsultingfirmErnst&Young.

The European Central Bank (ECB) considers NFC-based mobile paymentsamongthemostpromisingpaymentmethodsforconsumers.Suppliersaremaking consistent investments to update their NFC hardware andmerchants are installing contactless points of interaction based on NFCtechnology.

NFC payments are expected to increase as more consumers adopt thetechnology. Management consulting company Arthur D. Little estimatesthatglobalNFC-enabledsmartphonepenetrationwillincreasefrom23%in2014to72%in2018.

MOBILEPAYMENTSACROSSTHEGLOBE:ASIA-PACIFICREGIONSTILLLEADING

According toGfK’sFutureBuy2015 study,only3%of in-storepayments inEurope were conducted by mobile phone in 2015. In the US, mobilepayments also accounted for 3% of total in-store payments last year,comparedto9%incountriesintheAsia-Pacificregion,whichledgloballyintermsofmobilepaymentusage.

Europeans may not be the most active users of mobile paymentsworldwide, but adoption of contactless payments—which includecontactlesscardpayments—hasbeenrapid inEurope.Face-to-facemobilepaymentservicessuchasApplePayareeffectivelyasubsetofcontactless

Only3%ofin-storepaymentsinEuropewereconductedbymobilephonein2015.

Source:ShutterStock

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payments. And face-to-face contactless transactions processed by Visa inEuropehaveincreasedsignificantly.AccordingtoVisaEurope:

• In2013,onein60face-to-facepaymentsweremadeusingcontactlesspaymentservices.

• Between May 1, 2015, and April 30, 2016, however, contactlesspaymentsrepresentedmorethanoneinfiveofVisaEurope’sface-to-face payments. The growth and popularity of contactless paymentshave been driven by “everyday spend,” such as spending on lunch,restaurants and groceries, and by more merchants incorporatingcontactlesspaymentsintotheirofferings.

InourSeptember2015reportTheChangingFaceofMobilePayments,wediscussedthepopularityofmobilepaymentsinChina,whereAlipayWalletand WeChat Wallet have introduced user-friendly and widely popularmobilepaymentservices.

So,howdootherregionsmeasureupversustheAsia-Pacificregion?

Payments and commerce analytics company PYMNTS estimates that theAsia-Pacific region will continue to lead in terms of number of mobilepayment users in 2016, followed by Africa, the US and Europe. The firmexpectsthenumberofmobilepaymentusersworldwidetogrowby16.6%,to447.9million,in2016.

Figure1.NumberofMobilePaymentUsersGlobally,byRegion,2010–2016E(Mil.)

Source:PYMNTS/FungGlobalRetail&TechnologyTherearetwothingsthatshouldbenotedaboutthefiguresfromPYMNTS:First,theAsia-PacificregionandAfricahavesignificantlybiggerpopulationsthan theUSandEuropedo.Second,PYMNTS includesallmobilepaymentmethods, including SMS payments, in its figures—the numbers are notsimplyforface-to-faceretailtransactionssuchasthosemadethroughApplePay.

ThehighnumberofmobilepaymentusersinAfricacanbeexplainedbythepopularityofSMSpaymentsystemsacrossthecontinent;theseincludeM-Pesa, which was launched by Vodafone and Safaricom in Kenya in 2007.WithM-Pesa,mobilephoneuserscantransfermoneyandpayforproducts

112.5160.4

212.3

266.5

323.6

384.0

447.9

101.3163.6

6422.36.0

90.7

2010 2011 2012 2013 2014E 2015E 2016ETotal Africa AsiaPacificEurope LalnAmerica MiddleEastNorthAmerica

PYMNTSexpectsthenumberofmobilepaymentusersworldwidetogrowby16.6%,to447.9million,in2016.

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andservicesbysendingPIN-securedtextmessages.AccordingtotheWorldBank’sGlobalFindexDatabasereport, in2014,12%ofadults livinginSub-Saharan African countries had amobilemoney account, compared to 2%worldwide.However, inAfrica, the infrastructureneeded toenabledigitalmobile payments (such as Apple Pay payments) lags that of otherdevelopingregions.

HIGHDIGITALMONEYREADINESSINWESTERNEUROPE

Developed by Citigroup and Imperial College London, the Digital MoneyIndex measures 90 countries’ digital money readiness, and how they areadaptingtothemigrationfromcashtodigitalpayments.Nineoutof15top-ranked digital-ready countriesmeasured by the index are European, withFinlandleading,followedbySingaporeandtheUS.

Figure2.DigitalMoneyIndex:Top15Countries,2016

Country 2016Rank 2015Rank

GovernmentandMarket

Support

FinancialandTechnology

Infrastructure

PresenceofDigitalMoney

SolutionsPropensityto

AdoptFinland 1 1 14 7 1 7Singapore 2 2 1 3 7 8US 3 3 4 12 6 1UK 4 7 12 9 2 2HongKong 5 5 3 1 20 12Norway 6 6 13 8 3 5Sweden 7 4 9 4 9 3Switzerland 8 10 2 2 22 6Japan 9 9 5 18 8 4Netherlands 10 8 6 15 12 9Denmark 11 11 18 16 4 15Germany 12 12 7 5 21 18Canada 13 14 16 11 16 21NewZealand 14 15 15 22 11 13Austria 15 13 19 14 15 20Source:Citigroup/ImperialCollegeLondon

Nineoutof15top-rankeddigital-readycountriesmeasuredbytheindexareEuropean,withFinlandleading,followedbySingaporeandtheUS.

Source:M-Pesa

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Citigroupnotesthatprogress inadoptingdigitalmoneyinmateriallyreadyand mature digital countries is largely a consequence of investments innext-generation mobile broadband infrastructure and high smartphonepenetrationlevels.INCONTEXT:SMARTPHONEOWNERSHIPANDBANKACCOUNTUPTAKE

There are two fundamental prerequisites that consumers must meet inordertomakemobilepayments:theymusthavebothasmartphoneandabankaccount.Below,wetakealookathowpenetrationratesforthesetwoitemsvarybyregion.

Smartphone Penetration Lags in Eastern Europe, Latin America and theAsia-PacificRegion

Therearetwotiersofsmartphonepenetrationratesacrosstheglobe:

• NorthAmericaandWesternEuropeleadbyaclearmarginintermsofsmartphone ownership, and so comprise the top tier of regions.HKExnewsandHaitongestimatethat70.3%ofmobilephoneownersinNorthAmericaand74.3%ofmobilephoneowners inWesternEuropecurrentlyhaveasmartphone.

• Central and Eastern Europe, Central and Latin America, and the Asia-Pacific region comprise the second tier. It is estimated that even by2019, only about half of mobile phone users in each of these threeregionswillbeusingasmartphone.

Figure3.SmartphonePenetrationRateasShareofMobilePhonePenetration,byRegion,2010–2016E(%)

Source:HKExnews/Haitong/FungGlobalRetail&TechnologyBankAccountPenetrationStillRelativelyLowinEasternEurope

Bank account penetration is extremely high in Western Europe. In 2014,100%ofthepopulationage15andoverinFinlandandDenmarkhadabankaccount, according to theWorld Bank. In comparison, only 60.8% of thepopulation in Romania and 63%of the population in Bulgaria had a bankaccountin2014.

74.3%70.3%

43.1%42.8%40.1%

2010 2011 2012 2013 2014 2015E 2016EWesternEurope NorthAmericaCentralandEasternEurope CentralandLalnAmericaAsiaPacific

NorthAmericaandWesternEuropeleadbyaclearmarginintermsofsmartphoneownership.CentralandEasternEurope,CentralandLatinAmerica,andtheAsia-Pacificregioncomprisethesecondtier.

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Figure4.Europe:BankAccountPenetrationRates,2011and2014(%)

Amongthoseaged15andoverSource:TheWorldBank

INFOCUS:EUROPE’SMOVETOACASHLESSSOCIETY

ThemetricschartedaboveshowthatWesternEuropeisleadingintermsofadopting newpaymentmethods, includingmobile payments: countries inthis region take leading positions in the Digital Money Index, theirsmartphoneownershipratesareamongthehighestintheworld,andtheirbankaccountpenetrationratesalsotendtobehigh.So,itisworthwhiletofocusontheregiontoseewhereconsumerpaymentsmaybeheading.

Is Western Europe heading toward a cashless future? Perhaps, in thecoming decades, but not quite yet. Despite the developments in digitalpaymentmethods,cashisstillcommonlyusedinmanyregions,particularlyin Eastern Europe. According to Euromonitor International, cashtransactions accounted for 68% of all consumer payment transactions inWestern Europe in 2013 (latest available). But cash’s sharewas down 13percentagepoints inadecade,and the cashpayments figure forWesternEuropewasnotablylowerthanthe94%figureforEasternEurope.

BankaccountpenetrationisextremelyhighinWesternEurope.

Cashtransactionsaccountedfor68%ofallconsumerpaymenttransactionsinWesternEuropein2013.

85.7%89.1%

0 20 40 60 80 100

RomaniaBulgariaHungary

SlovakRep.Poland

CzechRep.Croala

ItalyPortugalGreeceAverageIrelandFranceAustria

SloveniaSpain

BelgiumGermany

UKNetherlands

SwedenDenmarkFinland

2014 2011

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Figure5.ConsumerPaymentTransactions,perType,inSelectedEastern*andWestern**EuropeanCountries,2003and2013

*EasternEuropecomprisestheCzechRepublic,Hungary,PolandandRomania.**Western Europe comprises Austria, Denmark, France, Germany, Greece, Italy, the Netherlands, Norway, Portugal, Spain,SwedenandtheUK.†Mobilepaymentsareincludedincardpaymenttransactions.††Electronicdirect/ACHtransactionsmainlyincludedirectdebitsandbanktransfers.Source:EuromonitorInternational/EuropeanBankingAuthority(EBA)

According to the EBA, cash payments inWestern Europe are expected tocontinuetodeclineascardpaymentsandNFCpaymentsgrowshare.

StrongGrowthinE-MoneyPaymentTransactionsinEurope

The ECB offers a more detailed breakdown of noncash transactions inEurope, showing that card payments and e-money payment transactionshave grown the fastest in recent years. Card payments, which grew at aCAGRof8.6%inthefouryearsended2014,includemobilepaymentssuchas those made through Apple Pay and Android Pay. These are tied to astoreddebitcard.E-moneytransactions,whichgrewataCAGRof17.7%inthe same fouryears, include thosemade through services suchasPayPal,whichareintermediariesandcan“store”payments.

1%

99%

EasternEurope2003

10%6%

81%

3%WesternEurope2003

22%

9%

68%

1%WesternEurope2013

CardPaymentTransaclons†

ElectronicTransaclons††

CashTransaclons

OtherPaperPaymentTypes

5%

1%

94%

EasternEurope2013

CardPaymentTransaclons†

ElectronicTransaclons††

CashTransaclons

OtherPaperPaymentTypes

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Figure6.ShareofNoncashTransactions*inEuropein2014andCAGR,2010–2014(%)

*Theshareoftotalnumberofnoncashtransactionsdoesnotsumto100%because“otherpaymentservices”arenotshown.**Creditcardpayments initiatedbyamobilephone,suchas thosemadeviaApplePayandSamsungPay,arereportedundercardpayments.†E-moneypayments, such thosemade throughPayPal,are transactionswherebyaholder of e-money transfers e-money value from his or her own balance to thebalanceofthebeneficiary.

HighPaymentCardandContactlessPaymentUsageintheUK

Contactlesspaymentsinmanymarketsaredominatedbycontactlessdebitand credit cards.Dataon contactlesspaymentpenetration, shownbelow,doesnotsplitoutmobilecontactlesspaymentsfromcard-basedcontactlesspayments.

46.1%

26.2%21.3%

3.5% 2.0%8.6% 2.4%0.0%

(7.8)%

17.7%

CardPayments**

CreditTransfers DirectDebits Checks E-MoneyPayment

Transaclons†

ShareofTotalNumberofNoncashTransaclonsin2014 CAGR2010–2014

Contactlesspaymentsinmanymarketsaredominatedbycontactlessdebitandcreditcards.

Source:ShutterStock

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The graphic below brings together ECB data on levels of card paymenttransactions and the share of face-to-face card payments that arecontactless. The number of card transactions per capita is defined asfollows:

• Low:<75transactionsperyear

• Medium:75–150transactionsperyear

• High:>150transactionsperyear

Contactlesspaymentpenetrationlevelsareplottedacrossrowsfromlefttoright,rangingfromthosethataccountforlessthan3%ofthetotalnumberofface-to-facecardtransactionstothosethataccountformorethan50%.

Thesedata indicate that no countries have yet hit the sweet spot of highcontactlesspaymentusageandhighcardpaymentusage(indicatedbythetoprightboxinthegraphic)—althoughtheUKcomestheclosest.

Figure7.Europe:ContactlessTransactions’ShareofTotalCardPaymentsin2Q15andCardPaymentUsageLevelsin2014

Source:ECBEasternEuropean countries scorehighly in termsof contactlesspaymentsas a percent of all face-to-face card transactions.However, card paymentusage inmanyof thesecountries is still rather low. In theCzechRepublic,for example, over 50%of face-to-face card transactionsweremade usingcontactless payments in the second quarter of 2015, but card paymentusagein2014waslow,atanaverageofabout1.5transactionsperpersonperweek.

Denmark,Estonia,Finland,Luxembourg,Norway,

SwedenNetherlands UK N/A

Austria,Croala,Spain France,Ireland N/A N/A

Bulgaria,Cyprus,Germany,Greece,Italy,Lithuania,Malta,Romania,Slovenia

Austria,Croala,Spain

Hungary,Poland,Slovakia

CzechRepublic

LOWContactlessPaymentUsageHIGH

Dataindicatethatnocountrieshaveyethitthesweetspotofhighcontactlesspaymentusageandhighcardpaymentusage.

TheUKscoreshighlyinbothcontactlessandcardpayments.

LOWCardPa

ymen

tUsageHIGH

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The UK scores highly in both contactless and card payments (with anaverage of more than three transactions per person per week). Overall,Western European countries rank highly in payment card usage, butcontactlesspaymentusageisstillnotwidespread.

TheECBnotesthatcountrieswithhighcontactlesspaymentusage,suchastheUK,PolandandtheCzechRepublic,havesuccessfullycoordinatedpoint-of-interest terminals in consumer-centric grocery and transportationsectors.

FromContactlessPaymentstoMobilePayments

One counterpoint to the presumed relationship between contactlesspayments andmobile payments is theUS (not shown in the data above).Anecdotal evidence suggests that mobile payments have had greaterconsumerimpactintheUSbecausetheyarearelativelynewofferinginthecountryandoffer adoubleaddedconvenience: thenoveltyof contactlesspaymentplus the convenienceofusinga smartphone topay. In countriessuch as the UK, where contactless payment options are alreadycommonplace, the enhanced convenience that mobile payment optionsoffertoconsumersislesssubstantial.

AccordingtotheECB,itiseasierandsimplertointroducecontactlesscardsthan it is to introduce mobile contactless payments, as contactless cardsinvolvethesamestakeholdersasinthetraditionalcontactcardecosystem.Themobile ecosystem is highly competitive andmobile payment servicesare built up by many different parties and components, such as mobilenetworkoperators,paymentprocessorsandNFC-enableddevices.

EUROPEANCOUNTRYSNAPSHOTS

UK

British mobile users have been among the earliest European adopters ofcontactlesspayments.From2015to2016,thecountryjumpedthreeplaces,to fourth place, on the Digital Money Index. According to MasterCard,

Countrieswithhighcontactlesspaymentusage,suchastheUK,PolandandtheCzechRepublic,havesuccessfullycoordinatedpoint-of-interestterminalsinconsumer-centricgroceryandtransportationsectors.

Source:ShutterStock

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transportation has been a key driver of contactless payment adoption byconsumersintheUK:

• TransportforLondon(TfL)reportsthatmorethan300millionjourneyshavebeenmadeusingcontactlesspaymentssincethemethodwasfirstaccepted on London buses in September 2012. The technology wasexpanded to cover the majority of London’s transportation inSeptember 2014. TfL’s buses went cashless in 2014, accepting onlycontactless payment methods. Mobile devices accounted forapproximately3.5%ofallTfLcontactlessjourneysinJanuary2016,andthatshareisexpectedtoincreasefurtherthroughouttheyear.

VisaEuropeestimatesthat25%ofBritswillusemobilepaymentsonadailybasisby2020,upfrom8%in2015.Thecompanyalsoreported237%year-over-yeargrowthincontactlesspaymentsintheUKinthesixmonthsendedMarch 2015. This was largely due to a September 2015 increase in themaximum pay limit, from £20 (US$31) to £30 (US$46). Restaurants wereamong the businesses benefiting the most; they saw a 155% increase incontactlesspaymentsduringtheperiod.

Germany

While many Germans still prefer to use cash to pay for everyday items,mobile payments are expected to gain ground. Payment service companyTSYS surveyed British and German consumers in 2015 to understandregional differences in payment preferences. The survey indicated thatGermanconsumersarelessexperiencedthanBritishconsumersareinusingdigital wallets, such as Apple Wallet, that store card-payment details.However, almost asmany Germans as Brits believe theywill be using in-storemobilepaymentsincomingyears.

Figure 8. Mobile Payment Usage/Attitudes: Survey of British and GermanConsumers,2015

UK Germany

Likelinessofusingin-storemobilepaymentsinthenexttwoyears* 73% 69%

Levelofdigitalwalletpenetration** 37% 33%

Levelofretailerapppenetration 72% 68%

Shareofuserswhohaveusedm-bankingapps 58% 44%

*In-storemobilepaymentsdefinedaspaymentsbetweenamobiledeviceandaPOS,wherebythepaymenttransactionistransferredtoasalesterminalviaWi-Fi,NFCorBluetooth.**Level of digital wallet penetration defined as respondent having used a digitalwalletinthelastsixmonths.Source:TSYS/FungGlobalRetail&Technology

TheNetherlands

MasterCard conducted a pilot of its biometric payment system in theNetherlands,and reports that83%ofusers in thecountry thinkbiometricidentity checks provide more security than passwords do, and that 93%thinkbiometricchecksaremoreconvenientthanpasswords.

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SomeDutchbanks,includingRabobankandING,haveintroducedtheirownmobilepaymentservicesintheirhomemarketusingNFCtechnology.

Spain

In2012,SpanishbankinggroupCaixaBank,inpartnershipwithVisaEurope,madeBarcelonathefirstmajorcityinEuropetoextensivelyusecontactlesspaymenttechnology.Thebankdistributedmorethan1millioncontactlesscards in the first year of the program, and enabled customers to makecontactlesspaymentsusingtheirsmartphonesbeginningin2014.

InJune2016,SamsunglauncheditsSamsungPayserviceinSpain,thefirstEuropeancountrywherethecompanyintroducedtheoffering.

Sweden

Swedencouldbecomethefirstcashlesscountryintheworld.Accordingtoastudy by Stockholm’s KTH Royal Institute of Technology, Sweden couldbecome a cashless society by 2030. Several leading banks have alreadycompletely digitalized their branches and no longer accept cash. TheRiksbank,Sweden’scentralbank,notesthat,in2014,cashincirculationasashareofGDPwas2.0%,comparedto3.0%inDenmarkand3.5%intheUK;someanalystsestimatethisratiocoulddropto0.5%inSwedenby2020.

TheCzechRepublic

Asnotedabove,contactlesspenetrationintheCzechRepublicisveryhigh.According to Visa Europe, contactless payments (mainly made throughcontactlesspaymentcards)accountedfornearly60%ofin-storepaymentsin the country in 2015. Yet cards are used infrequently in the CzechRepublic,relativetosomeotherEuropeancountries:theaveragenumberofelectronictransactionsperCzechhouseholdannually isonly70,comparedtomorethan300inScandinavia.

OUTLOOK:MOBILEPAYMENTSWIDELYAVAILABLEINEUROPEBY2020

While payment cards are widely used in Europe, contactless mobilepayments are not as popular—as noted earlier, only 3% of in-storepaymentsinEuropewereconductedviamobilephonein2015.Despitethecurrent low mobile payment penetration in Europe, payment systemproviders are rapidly introducing the infrastructure and secured systemsneededtoenablemobilepayments.

VisaEurope,whichistheleadingpaymentssysteminEurope,witha57.5%market share in 2015, believes that all Visa POS terminals in Europe willacceptcontactlessNFCpaymentsby2020.

MasterCard believes that high-value mobile payments will be availableacross Europe by 2017, thanks to upgrades of contactless paymentterminals.Currently,themaximumlimitforcontactlesspaymentsintheUKis £30 (US$46); in many other European countries, it is €25 (US$27).MasterCard also believes contactless payments will be available at all itsPOSterminalsinEuropeby2020.

The company has invested in biometric payment systems, which allowcustomers to pay online after their identity is verified via fingerprint orfacialrecognition(viaaselfiephoto).InternationalCardServicesconductedthefirstsuccessfulbiometricpaymentpilotintheNetherlandsin2015,and

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thecompanyisplanningtolaunchthispaymenttechnologyinotherpartsofEuropeandintheUSandCanadainthesummerof2016.

VisaandMasterCardhavebothpartneredwithApplePayandAndroidPaytodevelopmobilepaymentservicesusingAppleandAndroiddevices,andtointroducemobilepaymentsinnewregions.

KEYTAKEAWAYS:MUCHPOTENTIALFORMOBILEPAYMENTSINEUROPE

Western Europe has tended to lead other regions on the metrics thatsupportmobile payments. In order tomakemobile payments, consumersmusthavebothasmartphoneandabankaccount,andtheregionranksthehighestgloballyintermsofnumbersofsmartphoneusersandbankaccountholders,withaveragesabove95%.Yet,eveninEurope,onlyasmallnumberof face-to-face payments are currently made using mobile devices—suchtransactionsaccountedforjust3%ofallPOSpaymentsin2015.

MobilepaymentadoptioninEuropeisexpectedtomakegreatleapsinthecomingyears.Leadingpaymentoperatorsexpectthatallpaymentterminalsin Europe will be NFC ready by 2020. Consumer sectors that see a highnumber of low-value transactions channeled through payment terminals(such as transportation and grocery retail) look to offer the greatestopportunities; because consumers make frequent purchases in thesecategories, theydesirespeedandconvenience insuch transactions.Thesesectors can serve to introduce mobile payments to consumers, who willlikelywant to use them in other sectors once they are familiarwith howtheywork.

Some Western European countries are on the path to becoming near-cashless societies, and mobile face-to-face payments are likely to play asignificantroleinthisshift.

Consumersectorsthatseeahighnumberoflow-valuetransactionschanneledthroughpaymentterminals(suchastransportationandgroceryretail)looktoofferthegreatestopportunities.

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalystJanneEhoResearchAssistantHONGKONG:10thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223002470LONDON:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NEWYORK:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FBICGROUP.COM

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