Proximity Payment Market

Market Overview

The global proximity payment market size was valued at USD 18.6 billion in 2023 and is projected to reach USD 60.2 billion by 2032, registering a CAGR of 13.9% during the forecast period (2024-2032). As technology advances, smartphones become more affordable to consumers, boosting the proximity payment market share.

Proximity payments, also known as contactless payments, are transactions in which a payment is triggered by a payment device, such as a smartphone or contactless card, while in close physical proximity to a point-of-sale (POS) terminal or another payment receiver. This technology enables secure and convenient transactions without requiring physical contact between the payment device and the terminal. Some key advantages of proximity payment are real-time transaction processing, payment device adaptability, reduced transaction time, and greater convenience, all of which support the proximity payment market. Furthermore, the widespread use of proximity payment by shops, the rise in smartphone usage, and the spike in faster connectivity have enabled retailers and customers to make proximity payments using their smartphones, pushing market growth. 

However, rising data breaches and difficulty updating point-of-sale (POS) terminals limit industry expansion. On the other hand, developing economies offer significant opportunities for proximity payment providers to expand their operations, thanks to factors like middle-class expansion, rising urbanization, improved literacy, and a younger demographic that is more tech-savvy. Furthermore, the market will likely profit from greater developments and activities related to digital payments. 

Highlights

• The solution holds a significant market share by offering.
• Grocery Stores are a significant contributor to the market by application.

Market Dynamics

Global Proximity Payment Market Drivers

Increased Smartphone Adoption

The growing popularity of smartphones has driven the growth of mobile wallets, which act as digital platforms for storing payment cards and facilitating proximity transactions. The global smartphone user population is expected to reach 4.88 billion by 2024, accounting for 60.42% of the world's population. This represents a 14.9% growth over the previous year and nearly five times the number of smartphone users in 2014. 

Furthermore, popular mobile wallet apps like Apple Pay, Google Pay, and Samsung Pay use smartphone technology to allow users to make contactless payments at retail outlets, restaurants, public transportation, and other points of sale. For example, Apple Pay will be the most popular digital wallet in 2023, accounting for 92% of the market and available in 83 countries. In the United States, it is accepted by more than 90% of retailers and accounts for 12.62% of online payments. In the UK, 70% of customers use Apple Pay in stores, while 36% use it online.

Additionally, the continued rise in smartphone penetration, particularly in emerging markets, is expected to drive further expansion in proximity payments. Smartphone developments, such as increased security measures and the inclusion of more sensors, enhance the user experience for proximity payments. Increased smartphone usage, particularly the broad availability of NFC-enabled handsets, is critical to proximity payments' success and popularity. As the global smartphone user base expands, the market for proximity payments is poised for further growth and integration into everyday transactions. These are expected to impact the current proximity payment market trend.

Global Proximity Payment Market Restraints

Security Concerns

Despite security measures such as tokenization and encryption developments, proximity payments pose a substantial security risk. Consumers may be concerned about the danger of fraudulent transactions, data breaches, or identity theft linked with contactless payment systems. High-profile security incidents or data breaches can damage customer faith in proximity payment solutions, causing reluctance or hesitation to use these technologies.

According to a 2023 survey, roughly 35% of consumers who did not pay their bills using a mobile wallet cited security concerns as the most important factor, followed by 16% inconvenience and 14% payment issues. Also, According to a YouGov survey in the United States, over 55% of respondents have security concerns about contactless payments in 2020. According to the YouGov survey, many respondents were concerned about the security of contactless payments during the survey period. This highlights customer concerns regarding the security of contactless payment methods.

Additionally, according to the Federal Trade Commission (FTC), the number of fraud reports involving contactless payments in the United States was around the same in 2023 as in 2022. Still, the amount stolen was USD 1 billion greater, at USD 10 billion. Fraud losses have reached this amount, representing a 14% increase from 2022. Fraudulent activity, such as card skimming and NFC interception, highlights the difficulty of safeguarding proximity payment transactions and protecting consumer data from hostile actors.

Furthermore, regulatory authorities place strict criteria on payment service providers, financial institutions, and merchants to maintain the security of proximity payment systems. For example, the Payment Card Industry Data Security Standard (PCI DSS) establishes payment card data security criteria, including encryption, access control, and vulnerability monitoring. Compliance with the PCI DSS and other regulatory frameworks is critical for reducing security risks and preserving consumer trust in proximity payment solutions.

Global Proximity Payment Market Opportunity

Integration with Emerging Technologies

Proximity payment systems can integrate new technologies like artificial intelligence (AI), machine learning, the Internet of Things (IoT), and biometric authentication to improve security, personalization, and user experience. For example, AI-powered fraud detection algorithms can examine real-time transaction patterns to detect and prevent fraudulent activity. Furthermore, biometric authentication methods such as facial recognition and fingerprint scanning improve the security and ease of proximity payments, increasing acceptance.

Furthermore, payment service providers and financial institutions increasingly use AI and machine learning algorithms to improve fraud detection and prevention in proximity payment systems. Visa and Mastercard, for example, deploy AI-powered fraud detection models to detect suspicious activity in real-time by analyzing transaction patterns, user behavior, and historical data. These algorithms detect irregularities and flag potentially fraudulent transactions, adding extra security to proximity payments. For example, Mastercard's Decision Intelligence Pro is a sophisticated technology that uses generative artificial intelligence to instantly identify questionable transactions on its network. This feature is driven by a recurrent neural network designed in-house by Mastercard engineers. The technology employs machine learning algorithms to examine massive volumes of data in real-time, detecting any irregularities or inconsistencies that could signal fraudulent behavior.

Consequently, biometric authentication methods, including facial recognition, fingerprint scanning, and iris scanning, are integrated into proximity payment systems to improve security and user authentication. According to Juniper Research, the number of people using biometrically authenticated payments in 2023 is expected to be approximately 1.5 billion. The research agency also predicts a 138% growth in transactions via biometric-enabled POS terminals in 2023, from 19.5 billion in 2023. For example, Apple's Face ID and Touch ID capabilities allow customers to securely authorize iPhone transactions via facial recognition or fingerprint authentication. Similarly, Samsung Pay uses fingerprint and iris scanning technology to secure authentication during proximity payments, guaranteeing that only authorized users can initiate transactions.

Regional Analysis

North America Dominates the Global Market

The global proximity payment market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America is the most significant global proximity payment market shareholder and is estimated to grow at a CAGR of 14.1% over the forecast period. The North American proximity payment market refers to the adoption and use of contactless or proximity payment technologies in countries such as the United States and Canada. Proximity payments are transactions in which a payment device, such as a smartphone or contactless card, is brought close to a POS terminal to enable secure and quick payment processing. Statista estimates that the transaction value of proximity mobile payments in the United States will exceed USD 220 billion by 2023. This is based on NFC and other contactless technologies. Contactless payments are widely accepted in Canada, with approximately 73% of Canadians using them.

In addition, the estimated transaction value of proximity mobile payments in the United States indicates a substantial and growing market for contactless transactions. Rising transaction volumes reflect consumers' preference for contactless payments, demonstrating a shift toward faster and more convenient payment options. Furthermore, the widespread acceptance of proximity payments is evidenced by the high adoption rate of contactless payments in Canada, where a sizable proportion of the population uses this method. Businesses in Canada have adapted to meet the need for contactless payments, providing customers with a seamless experience. 

Europe is anticipated to exhibit a CAGR of 14.3% over the forecast period. Europe owns a substantial share of the market. According to Statista, the transaction value of proximity mobile payments in Europe is expected to reach €400 billion by 2021 and grow further. In the United Kingdom, where contactless payments are widely accepted, most card payments are currently made with this technology. Approximately 90% of face-to-face transactions in the United Kingdom are conducted via contactless payments. This is higher than in other countries. This high level of adoption reflects the integration of contactless payments into customers' daily lives, showcasing its convenience and efficiency. 

Furthermore, during the first half of 2023, the number of contactless card payments in Europe climbed by 24.3% to 20.9 billion, with a total value increase of 25.9% to €0.5 trillion. Contactless payments are commonly utilized in Europe, particularly among those aged 25 to 34, with a preference rate of 77% as of December 2022. 

Asia-Pacific holds a significant market share. According to Proximity Payment Market data, the Asia-Pacific region accounts for a minor percentage of the market. The Asia-Pacific region is expected to account for approximately 35% of the mobile payment market. This is owing to the expansion of e-commerce and the O2O industry and the widespread adoption of mobile technology in emerging nations. Mobile payment transactions in China have skyrocketed, with major mobile wallet providers handling massive transaction volumes. For example, in 2024, China is predicted to be the world's largest user of proximity mobile payment, with Alipay and WeChat Pay accounting for more than 90% of mobile payments. By April 12, 2024, these two apps will have about 2.5 billion users combined.

Additionally, mobile wallet use has impacted everyday activities, such as retail purchases and utility payments, making mobile payments an integral part of Chinese life. Continued payment technology innovation, such as biometric authentication and other security measures, may improve the user experience and security of proximity payments. As a result, proximity payments are widely accepted and integrated into daily contacts throughout the region. 

The Middle East and Africa is an emerging market. Many Middle Eastern countries have seen an increase in the use of digital wallets and mobile payment apps. In the United Arab Emirates (UAE), for example, Apple Pay, Samsung Pay, and local platforms like Beam and Etisalat Wallet have witnessed increased popularity. Government-led initiatives encouraging digital payments and the larger digital transformation goal in various Middle Eastern and African nations may help boost proximity payments' growth. 

Segmental Analysis

The global proximity payment market is segmented based on offering and application.

The market is further segmented by offering into Solutions and services.

The solution category in the offerings will have the highest market share in 2023, accounting for more than three-quarters of the total share, and is likely to dominate the market during the forecast period. Proximity payment solutions are the essential software, hardware, and platforms that enable contactless transactions between customers and retailers. These solutions include a variety of technologies and features that will allow secure and efficient proximity payments, such as contactless card readers, mobile wallet applications, payment processing platforms, and tokenization services.

Furthermore, solution providers create and deploy cutting-edge technology that supports a variety of payment methods, including NFC-enabled devices, QR codes, and biometric authentication. The primary goal of proximity payment systems is to simplify the payment process, improve transaction security, and create a smooth and frictionless payment experience for consumers and businesses. The growth is owing to the data breaches in proximity payments. Robust infrastructure should be built to provide a safe payment infrastructure. As a result, this segment is constantly under research and development to produce a secure payment environment, which is expected to contribute positively to the growth of the proximity market.

The service segment is also expected to develop fastest throughout the projection period, owing to the increased penetration of mobile phones in customers' lives and the convenience of proximity payments. Proximity payment services include diverse value-added offers and support functions that supplement proximity payment systems and improve the overall payment experience. 

The market can be bifurcated by application into Grocery Stores, Bars and restaurants, Drug Stores, and Entertainment Centers.

The grocery shop is anticipated to have the highest share, accounting for over one-third of all global proximity payments. Customers can make purchases at grocery stores more conveniently and securely by using proximity payments, eliminating the need for physical contact with payment terminals or cashiers. Grocery businesses frequently encounter large transaction volumes, necessitating quick and efficient payment processing systems to serve crowded shopping areas. Contactless cards, mobile wallets, and QR code purchases are examples of proximity payment technologies that help to simplify the checkout process, minimize wait times, and increase overall consumer happiness.

Moreover, with consumers increasingly adopting contactless payment methods, grocery retailers are embracing proximity payment technologies to provide a seamless and convenient shopping experience. The availability of payment infrastructure at various locations allows proximity payments. PayPal began serving grocery and meal delivery businesses in February 2023. PayPal QR code payments enable customers to pay in person by scanning a seller's QR code with the PayPal app on their smartphone.

Proximity payment systems assist bars and restaurants by allowing consumers to make quick and easy transactions when dining in or ordering takeaway. Contactless payment methods enable customers to pay for their meals or drinks with smartphones, smartwatches, or contactless cards, eliminating the need to present physical payment cards or cash. In addition to improving transaction speed and convenience, proximity payment solutions provide advantages such as higher table turnover, shorter wait times, and increased security. Bars and restaurants are increasingly turning to proximity payment technologies to streamline operations, improve customer service, and react to changing consumer tastes in the dining industry.

Recent Developments

• April 2024- ACI Worldwide and Arab Financial Services will drive payment modernization for banks and merchants in the Middle East.
• May 2024- FIS introduced Atelio™, an innovative new fintech platform.
• April 2024- Telefónica, IDEMIA Secure Transactions, and Quside formed a revolutionary alliance to implement a quantum-safe solution for IoT devices. This ground-breaking collaboration will establish new standards for security and resilience in IoT ecosystems, shielding device infrastructure and data from future quantum attacks.