Contactless Credit Cards Meet The Cell Phone

From InsideBay area.com Contactless cards speed transactions.

Interesting story, not because what a contactless card is, but what it could do.

YOU ARE at the mall with your toddlers. You've just left Albertson's and entered Home Depot, children and bags in tow. Searching through your purse for your keys, you are harried. But when you approach checkout to pay, you merely wave your purse at a reader device and proceed out the door.
What just happened?

The future of credit card transactions. I like to call it The Cash-Less Society Wave.

This year American consumers will be receiving credit cards that they will no longer have to swipe into readers. And for many transactions under $25 they will not have to sign.

These so-called contactless cards eventually will replace the magnetic stripe card consumers have been using for more than 20 years. Contactless cards represent an advance in smartcard technology that allows customer account information to be embedded on a card's computer chip, which can transmit information short distances.

The benefits to the consumer will be increased ease-of-use — you need only wave the card at or tap the card on the reader. In some variations, you might only need to wave a purse or wallet carrying the card within a few centimeters of the reader. Not only will you not have to fumble to pull out your card, the technology speeds up checkout time; and the merchant, after spending an initial $100 to $150 to install each reader, will enjoy a faster and cheaper transaction.

"There will be fast food, retail, gas stations and movie chains" using the new contactless cards, said Randy Vanderhoof, executive director of the Smart Card Alliance. "The only information on the smartcard is your credit cardpersonal account number.

"On a magstripe card, there is no security or protection. Anyone who captures it can create a new card," he said. But information on a smartcard can only be read by valid payment terminals.

Government agencies are including smartcard technology and contactless cards in many venues. Health organizations are meeting the requirements of the Health Insurance Portability and Accountability Act of 1996 by doing so as well. It also is anticipated that very personalized services like gift cards and loyalty programs will adopt contactless cards.

Toni Merschen, MasterCard's senior vice president of Chip Center of Excellence, said
that 20 percent of inactive MasterCard users who have tried contactless cards have reactivated their accounts.

Imagine being able to reactivate old accounts by 20%.

Tenzer speculated that future permutations of contactless cards, which are enabled by RFID technology, might be explored by cell phone manufacturers.

Motorola and Nokia are already working on a solution for their phones. I see the cell phone taking on more responsibilities soon.

I discuss my ideas when a cell phone and credit card meet here .

ViVOtech chairman Fernandes said a pilot program showed the potential of the cards with consumers who generally used cash or checks.

"Twenty percent of them shifted to contactless cards, and of those who did they spent 20 percent more," Fernandes said.

Not only are credit card companies reactivating old accounts by 20%, but they are getting their current customers to increase spending by 20%.