Contactless Credit Cards Work In The 'Blink' Of An Eye

Credit card users are finally free of the burden of swiping their cards and signing their name thanks to advances in RFID technology and new programs from banks and credit card companies looking to make the shopping experience a little sweeter.

Contactless cards fitted with RFID chips are now available, and solution providers should expect to see opportunities in the POS market for new systems and upgrades.

The process involves waving a credit card with the embedded RFID chip in front of a scanning device that connects it with the credit account. The card must be within 20 centimeters of the scanner in order to be read. Purchases can be made almost instantly without a swipe of a magnetic strip or a signature.

Chase Bank U.S.A. last month rolled out Visas and MasterCards with the technology, which it calls “blink,” in the New York tristate area at establishments such as 7-Eleven, AMC Theatres, CVS and Duane Reade.

“The payment business is evolving rapidly and changing monthly,” said Erik Michielsen, director of RFID and ubiquitous networks at ABI Research, Oyster Bay, N.Y. “The key to this technology, why you&'re seeing such rapid growth, is that it&'s really got triangulated benefits. It benefits the consumer, the merchant and the card issuer.”

Consumers benefit by not having to wait in long lines and from the customer loyalty programs tied to the system&'s ability to identify purchasers using the RFID system.

Michielsen said merchants benefit by reducing cash management issues and increasing customer loyalty.

“They&'re really going after younger markets with these cards and basically the ‘cool&' factor. They&'re actually finding that the average purchase increases by about 20 percent with the use of these cards,” said Bill Shaw, director of professional services at Nimax, the POS division of Ingram Micro, Santa Ana, Calif.

With a growing market among retailers, where do resellers fit in? “When it comes to the reseller channel market, we&'re concerned with a couple of different things,” Shaw said. “One is the [RFID card] readers, and right now this is a closed market. It&'s not a channel market. It has not reached critical mass. It is still considered in trial.”

When the technology is market-ready, he said, the channel will see opportunities selling both card reader devices and software that integrates the new system with existing systems or adds information-capture capabilities.

Mohammad Khan, president and founder of payment hardware company ViVOtech, Santa Clara, Calif., said the use of contactless credit card technology should be more widespread in 2006.

“There was a good track record of contactless technology to be accepted by the consumer,” Khan said. Contactless transit cards were popular in Hong Kong, he said, and devices such as the Speedpass, which is connected to an account to pay at gas stations, are popular in the United States. ViVOtech&'s readers have been approved for use by MasterCard as part of its PayPass program, he said.

“The next two years is the time to build the infrastructure,” Khan said. “By the time millions of cell phones are enabled with near-field communications technology, the infrastructure should be in place.”

Khan estimates that shoppers won&'t be paying with a wave of their cell phones until 2007 or 2008.

In spite of technological bells and whistles, credit cards will still carry magnetic strips for use at more traditional points of sale and will continue to display account numbers.

“It will take awhile for stores to adopt that technology. They&'re not just going to throw out their pin pads and signature capture pads because a new technology came along,” Ingram Micro&'s Shaw said.

“Just as with magnetic-strip cards now, we&'ve got lots of different types of devices that can read them and then software to capture that information.

It&'s just a matter of incorporating a new type of technology to do the same old thing, really,” he said. “Eventually those will become open systems as magnetic-strip technology is now, and when that happens, that&'s when things [will] start snowballing.”