Adoption of Contactless Payment for Retail, Transit Grows

Thirty-five million contactless financial payment cards (branded with MasterCard PayPass, Visa payWave or American Express ExpressPay) have been issued in the United States, with more than 400,000 readers in place at 80,000 merchant locations, according to Mohammad Khan, president and founder of ViVOtech, in a presentation to meeting attendees.

Merchants like McDonalds, CVS/pharmacy, 7-Eleven and Jack in the Box continue to accept contactless payments, and more merchants are jumping on board. New acceptance locations are popping up, too, in spots like taxis, parking meters, vending machines and sports stadiums. With the contactless payment acceptance infrastructure in place, industry experts also forecasted that the transition from payment cards and key fob devices to Near Field Communication (NFC) mobile payments would be straightforward.

New company research presented by Wendy Humphrey, First Data’s vice president of enterprise payments, asked merchants to cite the benefits of accepting contactless payments. Fifty-one percent of merchants said faster checkout and increased throughput at the point-of-sale (POS), 46 percent said the ability to support customer preference for the contactless payment option, and 25 percent said being ready for future payment solutions (like NFC).

The contactless payment momentum is not expected to slow; issuance will grow to 50 to 60 million cards in 2008, Didier Serra, general manager of the Americas for INSIDE Contactless, a leading contactless chip supplier, forecasted.

Chase, a leading issuer of contactless financial payment cards, reported good news regarding consumer use and loyalty. Mike Kutsch, vice president of card services for Chase, said the company continues to see “a positive impact on lift, shift and spend.”

Contactless Moves Along In Transit

Convergence of transit and financial payment markets was a key theme throughout the meeting, stimulated by updates on pilots by MTA New York City Transit (NYCT) and the Utah Transit Authority (UTA) where contactless financial payment cards are being accepted directly as fare media.

NYCT average fares on subway lines involved in the pilot were up 17 percent, while revenues were up 8 to 13 percent, Steve Frazzini, chief officer of AFC program management said, describing it as a “wow factor” in the first phase of the pilot. The pilot allows riders to use their MasterCard PayPass contactless card to directly pay for subway rides in New York City. “The convenience factor may play an important role,” he said.

Frazzini also announced that NYCT is now moving to the second phase of the pilot, where support will be added for buses, and for all contactless financial payment brands and form factors.

In Salt Lake City, the host city for this annual Alliance meeting, the UTA has completed a successful pilot and is moving to full deployment of contactless fare payment, Project Manager Craig Roberts announced. He said that UTA will expand acceptance of all major brands of contactless financial payment cards to regular buses, ski service buses, the TRAX light rail line and the commuter rail line.

Transit-specific contactless fare payment programs also continue to gain momentum in the United States, with active transit fare payment programs in Washington, D.C.; Baltimore; San Francisco; Oakland; Los Angeles; Chicago; San Diego; Seattle; Minneapolis; Houston; Boston and Atlanta. Representatives from two new major transit fare payments projects, Philadelphia (SEPTA) and Greater Toronto Area (Metrolinx), joined the Council to participate in the discussions on contactless deployment with other operators and suppliers.

Summit sessions also explored new models for transit payment -- using co-branded multi-application contactless smart cards for transit and financial payment, and looking at how transit can serve the unbanked or underbanked consumer with prepaid financial cards.

“The Alliance is proud to be able to host an open forum for industry stakeholders to come together and share their experiences and knowledge of the markets for contactless smart card technology,” said Randy Vanderhoof, executive director of the Smart Card Alliance. “This kind of meeting brings out a cross section of points of view that lead to expanded awareness and new ideas that benefit all involved.”