) believes that the future is contactless, and its enthusiastic
pursuit of the contactless technology seems to be paying off. The
company recently reported that there has been a 150% year-on-year
increase in the number of contactless transactions through
Barclaycard terminals. There are nearly 52,000 contactless
terminals set up all across the UK by Barclaycard. Barclays'
The Royal Bank of Scotland Group
), Bank of America (
), UBS (
) have yet to embrace this new technology with the same level of
gusto giving Barclays an edge in this field.
Our price estimate for Barclays stands at $18.30
, which is inline to the current market price.
Understanding the Contactless Technology
Contactless cards introduced by Barclays lets customers make
purchases of up to £15 ($24) without signing or having to
enter a pin. There are about 12.9 million contactless cardholders
in the UK, with Barclays debit and Barclaycard credit cards
accounting for over 11.4 million of these - an 88% share of the
contactless card market. The technology is yet to be implemented in
other countries around the world.
Barclays reports that 1.7 million contactless transactions were
processed in 2010. These transactions were largely at retailers
like Subway, Co-op, McDonalds and EAT where contactless cards allow
customers to complete transactions faster while reducing queuing
times for the retailers.
So What Does this Mean for Barclays?
Barclaycard contributes to nearly 7% of the company's value
according to our analysis, and the opportunity presented by the
increasing adoption of contactless technology could make the
division all the more valuable in the years to come.
We currently estimate the amount of Barclaycard assets to
increase from its current value of $47 billion to cross $70 billion
by 2017; however if the popularity of Barclaycard continues to
grow, then this value can cross $85 billion by the end of the same
period - a 20% increase over our initial estimates.
At the same time, the Barclaycard loan volume would also
increase by about 10% from our initial estimate to reach about $45
billion by 2017. The combined effect of these changes could
provide a 2% upside to the company's stock.
See our full analysis and $18.30 price estimate for