This autumn, the first contactless payment cards will be launched in the UK. Up to 2,000 retailers are targeted to accept contactless payments in London in an initial rollout that will later be expanded nationwide. Major banks and card associations are behind the launch, but contactless payments acceptance will rest on their ability to convince both retailers and consumers of the value of contactless payments.

Worldwide demand for contactless hardware, software, and services to support contactless adoption will reach more than $1 billion by 2012, up from just $260 million in 2007, according to a study by ABI Research.

"Europe has lagged behind Asia and the US when it comes to contactless payments, but the stage is now set for adoption," says senior analyst Jonathan Collins.

Card associations and issuers see contactless payments as a way to move low-value transactions away from cash and onto cards as well as speed-up transactions for retailers. The UK deployment isn’t the first in Europe but its scale combined with the UK’s leading European adoption of EMV-based contact smartcards, mean it will be a key test of contactless adoption in the region. Adoption of contactless payments will also bolster the rollout of Near Field Communication, which enables contactless payment - as well as a host of other contactless applications - to operate from mobile handsets.

"Contactless is a proven technology," says Collins. "As in many major cities across Europe, millions of people across in London use contactless ticketing on public transport. However, when it comes to contactless payments, challenges remain with regard to business models and partnerships. Before many European retailers commit to upgrading their POS terminals to accept contactless, they will need to be convinced that the investment is in their interests. Early European rollouts, combined with experience of advanced deployments around the world will be a key."