Spending on the contactless hardware, software, and services market will reach US$800 million by 2011, up from just US$260 million in 2006, according to a new report published by ABI Research.

Because they speed retail payments and public transportation, contactless payment deployments are quickly expanding around the world.  But these two largest contactless applications remain mostly separate, limiting the uptake of contactless cards and delaying the transition of contactless payment technologies into mobile phones.

“The benefits of contactless ticketing and payments have already been experienced in deployments and test trials around the globe, but a common infrastructure will fuel more rapid adoption,” says Jonathan Collins, senior analyst at ABI Research.

Proprietary transportation ticketing, and open credit, debit, and e-purse payments tied to financial service networks are the primary drivers for contactless transactions.  Contactless transportation ticketing dominated spending on contactless hardware, software and services in 2006, accounting for more than four times the expenditure in the banking market; however, by 2011 card issuers and other financial groups will be spending three times as much as transportation providers.

Both technology and business issues must be resolved before a single contactless infrastructure can be leveraged by card issuers and the emerging mobile phone contactless payment market.

Contactless commerce uptake is taking place at varying rates across regions, national markets, and market segments, as contactless payments are added to existing payment networks and environments.  In North America, open system payments are driving contactless adoption, whereas in Europe contactless ticketing systems are the primary drivers.

“Already in both North America and Europe trial work is underway to allow bank-issued contactless payment cards to interoperate with contactless transportation systems, but significant work remains to be done,” says Collins.