Quick credit card coming
Toolbox
By BOB KEEFE Cox News Service - Published: May 15, 2005
As if swiping a card at the checkout counter weren't fast enough, credit companies will soon let you buy goods by simply tapping a card, waving a key fob or holding a cell phone next to the cash register.
Visa, MasterCard and American Express all are planning nationwide rollouts this year of "contactless payment" programs.
Anyone who has used a Speedpass wand to buy gas at a Mobil or Exxon station already is familiar with contactless payments. The pinky-sized Speedpass contains a radio frequency identification (RFID) chip that transmits the user's credit and security information to a gas pump.
Credit card companies want to embed similar RFID technology in their plastic cards, key fobs or other devices that many consumers always carry with them, such as a cell phone or a handheld PDA computer.
For merchants, such quick-pay devices could make purchases with credit a faster and more attractive alternative to cash — especially at places where cash transactions are more common, such as fast-food restaurants and movie theaters. More transactions mean more money for merchants and for the credit card companies and banks that issue cards.
Card companies have flopped with new technology before, though. Convincing merchants to pay for special terminals won't be easy, and just because the option is available to consumers doesn't mean they'll use it.
Nonetheless, "we see great promise in this type of technology," said Molly Faust, a spokeswoman for American Express, which is beginning a nationwide rollout of its ExpressPay system based on chips developed by Dallas-based Texas Instruments Inc. "It's a great new payment product."
In a lengthy test in Phoenix, customers using Amex's chip-embedded key fobs at select merchants completed transactions 63 percent faster than with cash, Faust said. The average transaction amount, meanwhile, was up more than 20 percent, she said.
In addition to issuing key fobs to cardholders who request them, Amex has said it plans to include the technology in all its new Blue credit cards.
Amex this year plans to introduce ExpressPay at 5,300 CVS drug stores nationwide. It also has signed up other merchants, including 1,500 Ritz Camera shops and Sheetz convenience stores.
Other credit card companies are making similar moves.
MasterCard, the biggest proponent of contactless payment cards, has been diligently signing up merchants for more than a year to participate in its PayPass program, including select McDonald's, vendors at the stadiums of the NFL's Baltimore Ravens and Seattle Seahawks, and most recently Regal Entertainment Group movie theaters nationwide.
MasterCard ran an extensive consumer test of its contactless cards in Orlando two years ago and tested specially equipped Nokia cell phones with consumers in Dallas.
MasterCard officials declined to comment, in part because they were too busy preparing for another major announcement as early as next week, according to a company representative. Other MasterCard representatives said a major rollout of a contactless payment system is slated for Atlanta and other cities in coming months.
Visa International, meanwhile, announced in February it had completed development of its own contactless payment program. The world's biggest credit card company has been mum on specifics, but has hinted it expects to announce by this summer that one or more major national banks will support chip-embedded Visa cards. It also has successfully introduced the system, using both cards and cell phones, in Asia and other parts of the world.
"After successful trials in several regions of the world, we feel we have the right solution and this is the right time for Visa to make contactless technology available in the U.S. market," Visa USA executive vice president Elizabeth Buse said in a statement.
Increasing transactions — and fees — is the ultimate goal for the card companies. But they also believe consumers will find the new system safe and convenient.
After a quick-pay device or card connects to a RFID-enabled terminal, the transaction takes place over the credit company's network just as it would with a credit card. The buyer is given a receipt or electronic confirmation of the sale, which also appears on the monthly statement.
The companies believe the contactless cards and devices could cut the threat of fraud, since they don't actually display card numbers or other security information. If a device is stolen or lost, it can be deactivated just like a credit card, and some companies place limits on the amount of purchases using the contactless devices. In any case, consumers would be covered against losses just like with traditional charge cards.
The companies also believe they can make the devices hacker-proof so that thieves with RFID readers could not duplicate a customer's device.
Credit card companies have tried to make changes to the standard magnetic strip card before, and failed miserably. Most notable was Visa's U.S. launch of chip-embedded "smart" cards at the 1996 Summer Olympics in Atlanta, which never gained traction.
Bruce Cundiff, an analyst at technology research company Jupiter Research, doesn't give the new contactless cards a much better chance than those chip-embedded cards in the United States.
The biggest problem, Cundiff said, is convincing merchants to shell out millions to add new payment terminals to their stores. So far, he said, the card companies have typically helped pay for new equipment at partner merchants.
"It's just going to take a lot of money, and it's not going to come from the merchants, because they don't really need this," Cundiff said.
If merchants don't add equipment, the banks that issue MasterCard and Visa cards will be reluctant to spend $1 to $5 each producing them.
"It's the classic chicken-and-egg scenario again," Cundiff said.
Randy Vanderhoof, executive director of the Smart Card Alliance, which promotes the move to high-tech credit cards, acknowledged that convincing merchants to buy new equipment could be tough.
But Vanderhoof also said most stores replace their point-of-sale equipment every three to seven years. Many merchants may want to add the contactless payment technology in their next round of upgrades, he said.
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