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2014-2016 Contactless Programme Review

Status FINAL Version no V1.0 Version date July 2016 Document owner Programme Sponsor

Document author Briony Krikorian-Slade Ian Shayler

This document sets out some of the background for contactless rollout in the UK, including lessons learnt, and reviews The UK Cards Association Contactless Programme 2014 – 2016.

Reference Documentation Title Author Date 2014-2015 Scoping Document for Contactless Cards UK Cards July 2014 Contactless Cards Programme Initiation Document 2014 – 2016 v1.2 and v2.0

UK Cards July 2014 & April 2015

2015 Contactless Limit Change Review UK Cards July 2016

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CONTENTS 1 Executive Summary ................................................................................................... 3

2 Background ............................................................................................................... 5

2.1 Contactless introduction 2007 - 2008 ...................................................................... 5

2.2 Organic contactless growth 2009 – 2013 ................................................................. 7

2.3 UK Cards Contactless Programme 2014 – 2016 ..................................................... 9

3 Contactless Programme Review .............................................................................. 10

3.1 Programme Approach and Governance ................................................................ 10

3.2 Workstreams ......................................................................................................... 10

3.2.1 Limit Change .................................................................................................. 10

3.2.2 Retailers ......................................................................................................... 12

3.2.3 Transit ............................................................................................................ 13

3.2.4 Charity ............................................................................................................ 15

3.2.5 PR .................................................................................................................. 16

4 Contactless Adoption ............................................................................................... 18

4.1 Overall trends ........................................................................................................ 18

4.2 Other developments .............................................................................................. 20

Annex A: Contactless Programme milestones ................................................................ 21

Annex B: Contactless data .............................................................................................. 22

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1 Executive Summary Contactless payments are increasingly popular in the UK, used across the country for

everyday purchases like food, drinks and travel. However, in the early years after its

launch in 2007, contactless adoption in the UK was low. Customer awareness was not

widespread and there was a lack of reassuring messages about the security of

contactless. Retailer acceptance was patchy and the original limit of £10 was too low to

attract many retailers. Only a few issuers saw a competitive advantage in issuing

contactless cards when there was apparently low consumer demand. Adoption improved

over time but by 2013 the card payments industry had recognised that relying on organic

growth was not enough to see nationwide rollout.

In 2014, UK Cards began a collaborative contactless programme with issuers, acquirers

and the card schemes, specifically aimed at removing obstacles to adoption for

customers, retailers and issuers. This has included producing a best practice guide for

retailers, coordinating a limit change from £20 to £30, and proactive media aimed at

dispelling myths on contactless security. It has also included bespoke projects to extend

the use of contactless to transit and charity environments.

Partly as a result of this collaborative industry work, we have seen contactless transaction

volumes, and correspondingly values, increase exponentially over the last two years.

In 2015 we saw the value of contactless transactions reaching more than double of the

previous seven years combined, at £7.75bn. In the first half of 2016 we have seen this

surpassed with £9.3bn spent on contactless over just six months.

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Contactless transactions reached 1bn in 2015 and this

has been matched in the first half of 2016.

Contactless transactions now account for 17% of all

card transactions, or 1 in 6 card payments.

Contactless cards have grown from 38

million in 2013 to 92 million by mid-2016,

representing around 57% of credit and debit

cards.

Card acceptance has also grown – in 2014,

216,000 contactless terminals were in place.

This has almost doubled by mid-2016,

representing around 50% of bank-owned

terminals.

Meanwhile, those customers with

contactless cards are increasingly

using them for the first time, or using

them more often. Contactless rollout on

the Transport for London (TfL) network

is proving a consistent driver for

growth, representing 11% of all

contactless transactions in the UK.

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2 Background 2.1 Contactless introduction 2007 - 2008 Contactless cards were first introduced to the UK in 2007. Unlike the rollout of Chip & PIN in the UK in the previous decade, a collaborative approach was not initially taken to the rollout of contactless. The Chip & PIN project was put in place to manage the rollout of a fraud prevention technology where there was a clear business case for the participation of all stakeholders. Conversely, contactless technology was seen as a competitive offering and initially not all card payment participants saw a business case for investing in it. The launch of contactless was in the form of two products – Visa PayWave and MasterCard PayPass. Contactless implementation was not mandated by the card schemes and it was left to the market – card issuers, acquirers and retailers – to decide if they wished to introduce this new capability. However, the Visa and MasterCard products were both launched in September 2007 in order to ensure a better proposition to both retailers and consumers. The initial launch was also in the same location – seven London postcodes from the City to Canary Wharf. The launch was not as successful as originally anticipated. A number of issuers delayed their contactless issuing plans. Some card issuers incorporated contactless technology into existing credit or debit card products either as part of the natural reissue cycle, or as a forced reissue. Other issuers chose to offer contactless technology on a new product. Equally the number of contactless-enabled terminals in the originally agreed launch zone was not as great as expected, and even where they were put in place, only a small percentage were activated. Where consumers did have contactless cards, usage was also relatively low. There were a number of other contributing factors. There had been a lack of agreement that London was the appropriate place to launch in the first place. There was recognition that there was a failure to sign up major/national retailers, while some less suitable merchants were signed up e.g. hairdressers. Unforeseen merchant behaviour confused customers e.g. surcharging or imposing a minimum spend, or accepting a subset of cards; and there was confusion among consumers and retailers alike about the use of multiple contactless brands. As a result, figures from the end of 2007 showed:

• The total number of transactions (cumulative since launch began) stood at 10,000 transactions, with an Average Transaction Value of between £4 and £5.

• Issuance: approximately 250,000 cards in issue (location of cardholders unknown but likelihood was that the large majority lived or worked within the M25).

• Acceptance: of the 1,200 terminals within the original postcodes agreed for London launch around 25% were active.

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• Of the approximately 1,800 terminals outside the original postcodes but within the M25 around 9% were active.

• Of the approximately 1,000 terminals outside the M25 around 4% were active.

• Usage: individual issuers reported that a low number of the cards in issue were active, between 0.25% and 2%.

Although contactless rollout was not approached as an industry-wide project, UK Cards established a Contactless Rollout Committee in 2007 to provide a forum for the industry to discuss non-competitive issues. The Committee was composed of representatives from acquirers, issuers, and card schemes, both launch participants and those with a watching brief.

In 2009, UK Cards commissioned some market research to gain insights into the consumer reaction to contactless technology. The findings that emerged were:

• Awareness of new cards: 30% of respondents recognised at least one of the logos, but after prompting with a full description, awareness dropped to 25%. Younger respondents in particular were more likely to be aware of the logos than the cards based on a full description, and there was ignorance of the key features of the scheme. 39% of respondents had some awareness (logos and/or verbal description). The main sources of information were advertising (especially younger respondents) or from the bank / card issuer (especially older respondents).

• Contactless card holding, usage and purchases: just 4% of debit cards and 6% of credit cards held were thought to be contactless (possibly lower when brands taken into consideration). Contactless debit cards were more likely to have been used than credit cards, typically for takeaway food / sandwiches.

• Attitudes to new technology: spontaneous awareness of contactless card

functionality (among those aware of the logos) was still quite low, with a third unable to mention any feature. Half of all respondents though thought they were a good idea, and 41% felt comfortable using the technology, increasing among card owners. However, 57% didn’t think they had been explained enough (including 25% of those who had a contactless card). Security, fraud and acceptance were concerns that consumers had about contactless.

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2.2 Organic contactless growth 2009 – 2013 In Q2 2009 contactless rollout commenced in a second city, Liverpool, with retail deployment. Increased card issuance and acceptance enablement were seen as the building blocks required to increase contactless transactions. In 2010, the Retail Community Contactless Liaison Group was established for retailers to share their experiences of contactless implementations and for the cards industry to help build the case for contactless implementation. The cards industry also engaged in a concerted effort to agree a common user experience that culminated in cross-industry issuer agreed position on consumer messaging that would be used by all issuers. This included pictorial messaging on how a consumer makes a contactless payment, cardholder benefit statements, card carrier messaging and FAQs. By 2013, rollout of contactless was regarded as relatively successful in the Greater London / M25 area with a number of big retailers having installed contactless-enabled terminals, and evidence of good usage in London with a growing proportion of Londoners paying for their coffee and sandwiches with contactless cards. However, there was a concern from the card payment industry that contactless rollout had reached an impasse, with difficulties reaching new demographics and virtually no penetration outside of London. Despite increased issuance and acceptance, contactless transaction growth during this period was slow:

• 156,000 transactions were made in 2008, 364k in 2009, 1.7m in 2010, 5.5m in 2011, 25.6m in 2012 and 100.4m in 2013. So by 2013, under 1% of card transactions were contactless.

• Issuance: 1.5m cards were in issue in 2008, 6.8m in 2009, 12.9m in 2010, 22.5m in 2011, 31m in 2012, 38m in 2013. So by 2013, just under 25% of cards were contactless with nine issuers on board.

• Acceptance: 8,000 bank-owned terminals were in place in 2008, 23,000 in 2009, 53,000 in 2010, 80,000 in 2011, 144,000 in 2012, 175,000 in 2013. By 2013, 25% of bank-owned terminals were contactless.

• Usage: the activation rate of cards was estimated to be 30-45%.

In January 2014, UK Cards was approached by some of its members to take a more structured approach to the rollout of contactless. UK Cards therefore began discussions with the card schemes about how to address remaining obstacles to issuance, acceptance and usage in the UK. UK Cards produced a Scoping Document, which

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identified some of these obstacles, based on customer research undertaken by issuers and other bodies. Obstacles to usage:

• Security - concerns about stolen/lost cards leading to multiple transactions, unintended transactions in proximity to a reader and data sniffing. Some consumers saw contactless as a regression from Chip & PIN.

• Loss of control – control mechanism in other forms seen as missing, leading to frivolous / unaccountable spending.

• Poor customer experience – technical issues (e.g. faulty cards) or customer inconvenience. Any inferior or problematic experience was always compared unfavourably against the ubiquity of cash.

• Don’t know how it works / haven’t got round to trying it.

• Lack of acceptance by merchants.

• Prefer using cash.

Obstacles to acceptance: • Retailers not investing in POS as the business case was not sufficiently

compelling:

o Cost – terminal costs, maximising POS longevity, training staff, liability for accidental transactions

o Cost - Concern that NFC / other technology would require terminal change soon

o Change of terminal more likely to be driven by compliance with PCI-DSS standards than by scheme mandates

o New technology like Zapp undermining business case for POS

• Limit too low to attract merchants – lower than average basket in many merchants; could produce frustration from consumer if not able to use contactless; lower per transaction charge with higher limit; and could encourage higher spend

• POS with contactless capability not switched on • No clear strategy from the cards industry on contactless cards and mobile

contactless payments

Obstacles to issuance: • Waiting for clear consumer demand – especially given 3 – 4 year card renewal

cycle

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2.3 UK Cards Contactless Programme 2014 – 2016 UK Cards proposed a 2-year Contactless Programme to address the identified obstacles and increase contactless adoption in the UK. The Programme was intended to bring together issuers, acquirer and cards schemes to work collaboratively to supplement the organic growth of contactless adoption. In July 2014, the UK Cards Contactless Rollout Committee approved the proposed Programme, to run from July 2014 to July 2016. The Programme vision was: ‘Consumers will have a consistent and positive experience when using contactless cards across the UK with both merchants and transit operators.’ To achieve this, the Programme was originally built around four workstreams addressing the different obstacles that had been identified. An additional workstream was added in 2015, and some changes made to the scope of the other workstreams. The final workstreams and their objectives are listed here; where these differed from the original objectives this is explained in the next section.

• Limits: to agree and implement raising the contactless limit to £30 from 1 September to be completed by 31 October 2015 in all contactless enabled terminals.

• Retailer: to ensure the consumer experience is consistent across different merchants in the UK, and maximise value to merchants.

• Transit: to deliver an agreed Contactless Transit Framework by the end of 2015.

• Charity: to work with the charity sector to develop a seamless customer journey for donating by contactless; and to increase the penetration of contactless in the sector through promotion to charities and raising public awareness.

• PR: to promote contactless cards through media and to merchants based on

consistent and timely data from members and other stakeholders.

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3 Contactless Programme Review 3.1 Programme Approach and Governance A tailored approach was taken to running each workstream, but ensuring that acquirers, issuers and the international card schemes were involved in each one. The Programme was largely resourced by UK Cards staff but for some of the workstreams additional resource was required as the scope changed. The Contactless Rollout Committee acted as the programme board, overseeing the programme at its quarterly meeting. Regular updates were provided to the UK Cards Management Committee and other committees where necessary to raise awareness of progress. Effective communication and consultation with retailers, transit operators and third party providers was seen as a crucial part of the work to ensure consistent rollout of a contactless consumer experience. UK Cards therefore worked to ensure that specific stakeholders were consulted on the relevant workstreams, and that stakeholders in general were kept up to date with changes through targeted communications and the UK Cards website. 3.2 Workstreams 3.2.1 Limit Change When a purchase is made with a contactless card, the value has to be below a certain amount – this is known as the contactless limit. (If the value is above the limit, the payment will default to a Chip & PIN payment for card, or, if available, a Higher Value Payment1 for a mobile phone.) The limit differs in countries around the world. In the UK, the initial limit when contactless was introduced in 2007 was £10. This was subsequently raised to £15 in 2010 and £20 in 2012.

1 A Higher Value Payment (HVP) in excess of the contactless limit can be made by a device (such as a mobile phone) that has a NFC capability, has been accredited by the card schemes for HVPs and a consumer can authenticate themselves using the device prior to making the payment.

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Deciding factors in changing the contactless limit include customer comfort, retailer average basket size and general fraud concerns. Prior to the UK Cards Contactless Programme, limit changes had been discussed between individual card schemes and their acquirers and issuers, and then agreed between the card schemes and communicated to stakeholders.

As part of the Contactless Programme, the card schemes agreed it would be sensible to discuss and agree the value and date of the next limit change within an open forum, and to work through the details and potential obstacles together to ensure a smooth implementation of the change. A Limits Working Group was established with a monthly call until August 2015. The deliverables and progress against them are listed below.

• Agreement of the date in 2015 for the limit change to £30. A two-month implementation was agreed to run from 1 September to 31 October, to allow for terminals to be updated across large retail estates. The date also took into account the 2015 Rugby World Cup to allow for a higher contactless limit in the 13 stadiums and 15 fanzones across the UK.

• Industry implementation plan, including contingency and recovery plans. A detailed implementation plan was developed with the help of the Limit Working Group. This included developing the customer proposition, including technical details such as likely delays in transaction time, and suggested dates for acquirers to meet with retailers and third party providers.

• Communication of new limit and date to cardholders, merchants and other stakeholders. From September 2014 UK Cards met regularly with the British Retail Consortium as a major representative body of large retailers, and provided written updates to questions posed. The Limits Working Group also suggested dates and content for issuers to use to communicate the change to cardholders.

• Coordination of media and PR materials. UK Cards was given precedence to lead on the limit change. In February 2015 UK Cards announced the limit change, using the 2014 annual contactless growth to demonstrate the growing consumer appetite for contactless. In August 2015, UK Cards led the media work in the run up to the change on 1 September.

Summary: overall, the 2015 limit change went smoothly, with few reported incidents from acquirers or issuers. The media coverage was positive and lasted for several months after the change. A more detailed report is provided in the UK Cards document Contactless Limit Change Review.

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3.2.2 Retailers The card payments industry works with retailers on a daily basis to ensure that card payments operate smoothly for both the retailer and customer, whether in store or online. Working with retailers was therefore a core part of meeting the Programme objective, that consumers have a consistent and positive experience paying with contactless. In particular, we looked to address the specific obstacles to contactless acceptance and terminal activation for retailers that had been identified, including the limit being too low (see above workstream); the lack of business case for investing in contactless; and concerns over ongoing card scheme requirements. We also aimed to address customer usage obstacles such as poor technical experience and lack of contactless understanding from staff.

A Retailer Working Group was established with a bi-monthly call until August 2015. The deliverables and progress against them are listed below.

• Develop a generic merchant information pack, including template internal business case for contactless, best practice customer experience story, staff training and case studies. We collected best practice from acquirers and retailers, which was published in our Guide for Retailers: Accepting contactless and higher value contactless payments (the Retailer Guide) in July 2015. This also provided detail on Higher Value Payments, to coincide with the launch of the first implementation in the UK, Apple Pay.

• Develop common contactless store signage and stickers. It was decided that sufficient collateral had been produced by acquirers so no further work on this was done.

• Develop and promote information on the contactless customer journey to third party players, including POS and EPOS suppliers and software providers. The dissemination of the Retailer Guide was seen as meeting this requirement together with the ongoing discussions that the card schemes and acquirers were having with these stakeholders.

• Develop a strategy to increase deployment of contactless in target merchant sectors. Having looked at potential areas for contactless expansion, UK Cards identified charities as a sector where collaborative work could facilitate growth. This led to a new workstream being added to the Programme (see below).

• Track progress of merchant implementation and terminal enablement, monitor consistency through mystery shopping programme, and track and link regional projects where possible (e.g. merchant and transit sectors). UK Cards worked with

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acquirers to anticipate and support retailers rolling out contactless. This included some large retailers in 2015 such as the Tesco supermarket chain. We identified particular regions of contactless growth and sought to promote the Transit Project (see below) in these areas, as well as supporting specific contactless promotions such as the Handepay ‘contactless street’ experiment in Manchester in early 2015.

• Define and deliver more detailed monthly collation of contactless statistics e.g. postcode heatmaps and data. This deliverable was included to assist in promoting media messaging to show that the rollout of contactless was not just confined to the South East / London but to track its wider spread. This data would show where contactless cards had been issued and also where contactless transactions were taking place. Ad hoc data had been produced in the past but it was not feasible / resource effective to establish a regular reporting programme that needed the involvement of all issuers and acquirers to give an overall industry view.

Summary: the increased interaction with retailers on contactless and in particular the Retailer Guide undoubtedly helped to break down the identified obstacles, and allowed some retailers to build a business case for implementing contactless. 3.2.3 Transit An exciting area into which contactless card payments have expanded in recent years is public transport, or transit. Individual card industry stakeholders had been working with Transport for London (TfL) on using contactless cards for payment alongside Oyster, their existing smartcard system, within its network since 2008. TfL anticipated benefits both in cost-saving (maintaining fewer smartcards and ticket machines) and time-saving (as consumers no longer had to top up their cards). In November 2010, UK Cards was approached to assist in facilitating an agreement between the cards industry and TfL, as it was proving difficult to achieve individually. In January 2011, a new contactless transaction model was agreed that allowed fares to be aggregated during the day, charged to the consumer’s account at the end of the day and that shared liability where TfL did not receive payment.

UK Cards continued its role in facilitating discussion between TfL and the cards industry where collaborative activity was required such as agreeing common consumer messaging that both industries would use, identifying where consumer problems could arise and how these would be dealt with. In December 2012 contactless payments were launched on TfL buses, and in September 2014 this was rolled out across its network of buses, underground, light-rail and some mainline trains. It quickly became clear that the TfL contactless rollout was very successful, both in migrating customers from Oyster to contactless, and in driving up use

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of contactless more generally as people went on to use their cards in the retail environment. Initially the aim of the Transit workstream was to continue to support the TfL implementation (including expansion to other areas on the network like Gatwick), establish a version of the model that could be used by other transit operators and to ensure a consistent approach across other transit operators who were showing interest. However, it quickly became clear that the level of interest from transit operators and scope of what was required would warrant a separate project. The Contactless Transit Project was scoped in January-February 2015 and began in March 2015. UK Cards employed two extra personnel to run the project. The Project had its own governance structure: a monthly working group of transit operators, issuers, acquirers and card schemes; a 6-weekly steering group; and an executive group meeting three times a year. The deliverables and progress for the project are listed below.

• Develop a national Contactless Transit Framework that will consist of an agreed set of Customer Use Cases, a Risk & Liability Model, Implementation Guidelines, Transaction Process Model, a Framework Rules & Governance Model and a Communication Toolkit. The prioritised Use Cases led to three Contactless Transit Models being developed – Single Pay As You Go; Aggregated Pay As You Go; and Pre-Purchase Model. Transaction Processes, Risk & Liability and Implementation Guidelines were developed for Models 1 and 2. The Project developed a set of documents detailing the Contactless Transit Framework which were made available on the UK Cards website in January 2015.

• Contactless Transit Roadmap: Categorise use cases in to: 1. Achievable within project; 2. Achievable later (technology or commercial agreement dependent); 3. Unlikely to be achieved within the next 5 years. UK Cards developed a high level roadmap for the rollout of the three models. We also published a Regional Engagement Paper, outlining the propensity for uptake of the Models around the UK, and existing contactless payment use in each region. The Project coincided with a political trend towards devolution to the city and regional level, which will allow Mayors and Combined Transit Authorities more autonomy over transport in their local areas.

• Post Project Workplan: Shared vision statement and workplan of how to deal with outstanding issues and timeline for identified next steps. The Project was extended – see below.

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At the end of 2015 it became clear that further work was needed to understand Model 3 (Pre Purchase Model) in more detail. The Project was therefore extended to run until May 2016 initially, and then until May 2017 to cover these additional workstreams:

• Model and Framework Development. The Project will consider currently unsupported use cases (e.g. discounted and concessionary travel) and how these can be included in the Models.

• Transit Operator Support and Framework Promotion. Some transit operators are progressing with the implementation of Models 1 and 2 and the project team will continue to be a point of contact to resolve any card industry related issues and provide support in understanding the Framework and Models. The Project will also continue to promote the Framework with wider stakeholders and the public.

• Model and Transit Operator Interoperability. The Project will support stakeholder groups to develop the business requirements for interoperability between different transit operators.

• Form Factor Interoperability. To understand how existing and future payment requirements and capability will impact on Transit use cases, including how different form factors can be used to support one customer journey.

Summary: the Contactless Transit Project has been widely supported by the card and transport industries, as well as national and local government. In what has often been a fragmented transport industry, the Project has been praised as encouraging transport operators to work together for the benefit of customers. The extension of the Project led to further resource requirements, but this has been met by a combination of Government, card industry and transit industry funding. A number of transport operators are planning implementations of Models 1 and 2 in 2016/17.

3.2.4 Charity Following a discussion with a key charity in April 2015, UK Cards added an additional charities workstream to the Contactless Programme. Charities were looking for a means to replace low value cash donations, which were declining, and the potential for contactless growth in the sector was perceived as high. A Contactless Charity Project was established in July 2015, with a working group of charities, acquirers, issuers and card schemes meeting every 6 weeks. The deliverables and progress against them are listed below.

• Develop an evidence base to support the business case for contactless low value charitable donations, including drawing on lessons learnt from SMS and direct debit donations. The Project Initiation Document outlined some of the initial rationale and benefits for charities. The initial workshops outlined pen profiles of

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target donators and how they could be attracted by a contactless donation proposition.

• Charity sector business requirements by end 2015. The Project identified three Contactless Charity Models: Attended Portable; Unattended Outdoor; Unattended Indoor. The Business Requirements Definition detailing these models was agreed in February 2016. This is being shared with potential vendors to help encourage POS solutions to be developed.

• Best practice guidance for charities on how to implement contactless donations, based on business requirements. The Project is currently developing Implementation Guidelines and a Comms Toolkit for charities that may also include a brand / slogan e.g. ‘Tap to Give’.

• Substantial pilot with select charities using contactless terminals in Q3/4 2016. A number of pilots have taken place or are planned in 2016, for all three different Models.

Summary: there has been significant interest from the charity sector in the three different models. The challenge will be in encouraging sufficient supplier interest to develop alternate pricing models to allow wide take up by the industry. A number of pilots are planned for 2016/17. 3.2.5 PR UK Cards has been leading PR activity on contactless since its launch in 2007. However, it was identified that a more targeted approach could help overcome the obstacles to customer adoption – particularly security, loss of control and preference for cash. The UK Cards communications team led this work, with frequent interaction with issuer, acquirer and card scheme press offices. In late 2014, the communications team held a workshop with representatives from press offices to develop a more detailed workplan.

• Promote the business case for contactless to retailers to increase acceptance, through trade as well as national press e.g. shorter queue times, fewer staff, reduced overheads etc. This can include promoting and publicising high street retailers that have gone contactless (retailers will appreciate the PR). Promotion of the Retailer Guide and move to £30 limit to trade press.

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• Develop mythbusting material to dispel contactless misconceptions, particular on security issues. Use upcoming fraud figures to highlight how little fraud occurs in contactless cards compared with other payments. UK Cards developed a series of FAQ documents for press offices to use on common issues, to ensure consistent messaging. Used fraud figures to demonstrate security of contactless. Reacted swiftly to any negative press stories.

• Use heat maps to highlight the disparities in contactless regionally across the UK, and encourage inter-regional/city/town competition on uptake. Although Contactless Rollout Committee agreed that this would assist with PR heat maps were not produced. Ad hoc data had been produced in the past but it was not feasible / resource effective to establish a regular reporting programme that needed the involvement of all issuers and acquirers to give an overall industry view.

• Develop a story on the future of contactless – how people might use it in future to pay, and shared predictions. UK Cards published 10 Years of Chip & PIN in December 2015 and featured a contactless-specific section in UK Card Payments 2015 and 2016 with future predictions.

• Encourage journalists to use contactless. Develop human interest stories to

increase consumer use, aimed at lifestyle and consumer press, and/or bloggers. Proactive reaching out to mainstream media on specific interest stories e.g. transit and charity.

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4 Contactless Adoption 4.1 Overall trends The last two years have seen exponential growth in contactless transaction volumes and values. This has been driven by increases across all of the original metrics identified: issuance, acceptance and usage. Transactions 319 million transactions were made in 2014, 1046 million in 2015, and 1 billion in the first six months of 2016 (projected 2 billion by end 2016). By June 2016, 17% of card transactions in the UK were contactless. See Graph 1 below.

Graph 1: Contactless card transactions in the UK

Issuance 58m cards were in issue in 2014, 79m in 2015 and 92m by mid-2016. By June 2016, around 57% of cards were contactless with 15 issuers on board. See Graph 2 below.

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Graph 2: Contactless cards in issue in the UK

Acceptance 216,000 bank-owned terminals were in place in 2014, 310,000 in 2015, and 393,000 in the first 6 months of 2016. So by mid-2016, around 50% of bank-owned terminals were contactless. See Graph 3 below.

Graph 3: Contactless bank-owned terminals in the UK

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4.2 Other developments A number of other developments occurred at the same time as the UK Cards Contactless Programme which encouraged contactless growth.

• Mobile Phone ‘Pays’: the imminent launch of various smartphone pays – Apple Pay, Android Pay, Samsung Pay – provided an incentive for some retailers to accept contactless. Apple Pay launched in July 2015, Android Pay launched in April 2016 and Samsung Pay is soon to launch. As with the launch of contactless cards, it is expected that adoption rates and transaction volumes will grow as the number of mobile contactless payment capable devices grows, consumers adopt this new way of paying, and compelling value added services are launched.

• Card scheme mandates for contactless POS: MasterCard and Visa introduced the following mandates to encourage contactless and Higher Value Payment adoption:

o 1 January 2016 – all new POSs to be contactless-enabled o March 2016 – all new POSs to be Higher Value Payments enabled o 1 January 2020 – all new and old POSs to be contactless-enabled

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Annex A: Contactless Programme milestones Milestone Date 2014 Start of 2014-16 Programme July Card scheme mandate confirming contactless limit change Aug TfL contactless expanded from bus to rest of network Sep 2015 PR on contactless limit increase and 2014 growth Feb Contactless Transit Project started Mar Contactless Retailer Guide published June Apple Pay introduced in UK July Intensive PR on contactless limit increase July TfL contactless extension to Gatwick Sep Contactless limit increase from £20 to £30 Sep-Oct Contactless Charity Project started Sep Contactless Transit Project Phase 1 completed and Contactless Transit Framework published

Dec – Jan 2016

2016 Contactless Transit Project extended Phase 2: stage 1 Jan – May Android Pay introduced in UK May Contactless Transit Project extended Phase 2: stage 2 May – May 2017 End of Programme July 2016

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Annex B: Contactless data Year Card

issuers Cards in issue

Bank-owned terminals

Transaction volumes

Transaction values

Average Transact-ion Value (ATV)

2008 6 1,546,694 8,063 156,745 £514,769 £3.28

2009 6 6,837,254 22,764 364,189 £1,425,073 £3.91

2010 7 12,876,757 52,660 1,664,505 £7,389,042 £4.44

2011 7 22,515,089 79,983 5,516,499 £29,449,018 £5.34

2012 8 31,008,589 143,857 25,588,361 £165,157,826 £6.45

2013 9 38,123,614 175,472 100,388,078 £653,379,565 £6.51

2014 13 58,006,315 215,380 319,233,770 £2,324,351,549 £7.28

2015 15 79,342,864 309,706 1,045,565,266 £7,746,742,798 £7.41

2016 (Jan – June)

15 92,112,384 393,032

1,099,034,345

£9,271,108,137

£8.44

2016 projections

Over 2bn £20bn