Will contactless payment cards connect in the U.S.?
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Everyone points to how Korea, Japan and other Asian countries have embraced the new technology and wonders why the U.S. lags behind. Visa's Swanson says it's difficult to compare the Asian markets with the United States, but compared with other payment systems, she says, "this has been the fastest rollout of a new payment technology in the U.S. -- ever."

Security concerns
Still, a 2006 survey of Generation X and Y members conducted by Market Platform Dynamics showed that more than 60 percent said they would not use contactless fobs or cards because of security concerns. Its proponents, nevertheless, say the rate of adoption will probably increase as consumers realize that the potential for fraud with the new technology is small.

Many confuse the technology used in contactless payments with the RFID technology used in inventory control. With the RFID technology used in inventory tagging, users have a radio signal that broadcasts widely and at high speeds so they can track inventory all over the warehouse or store. Contactless technology, on the other hand, uses a radio frequency that seems like a weak college FM station by comparison, reaching no more than a few inches from the card reader. It is still known as RFID or may be called near-field communication.

Furthermore, each transaction must be deliberately initiated by the consumer and teed up by the merchant. Finally, the radio signal for each transaction is encoded with its own special transaction number, a dynamic pass code. "Someone else can't just pull the number out of the air and use it again and again," Friedman says. "It has to run through an actual reader."

As with any type of credit or debit card, the contactless cardholder is not responsible for unauthorized purchases if the card is lost or stolen, according to the cardholder agreement.

Beyond credit cards
What's most exciting about the technology is its potential. MasterCard gave out contactless PayPass wristbands preloaded with $25 to 5,000 fans at a New York Giants-Indianapolis Colts football game, which could be used at concession stands at Giants Stadium. The Austrian watchmaker LAKS has introduced the "Smart Transaction" watch. And a number of companies are offering key fobs with contactless technology.

In practice, the Utah Transit Authority, or UTA, will employ the technology on its buses that serve Alta, Snowbird and other ski areas in the canyons surrounding Salt Lake City. Not only will season-pass holders be able to wave their passes in front of the reader for a free ride up Little Cottonwood Canyon, other skiers can use their contactless cards to pay, as well.

For the UTA, the approach comes with a raft of cost-saving benefits. "First, we're able to turn around and bill the ski areas for their season-pass holders' transportation," says Justin Jones, a UTA spokesman. "Next, it's amazing how much it costs us to have people gather the change, count the change and take the change to the bank. If we have a way to remove all of that and make it all electronic, we save money."

In another innovative use recently, Visa, Chase, Nokia and Cingular joined forces to conduct a trial at Atlanta's Philips Arena, where 150 sports fans used cell phones with contactless capability, which they waved in front of card readers to buy concessions or used to download game statistics at Atlanta Hawks and Thrashers games. (These phones used near-field communication.) According to Swanson, trial participants, "loved the idea that they essentially could carry their credit card in their phone, so much so that they wanted to use the phone outside the arena."

Despite potential customers' security concerns, Friedman of Mercator Advisory Group remains optimistic about contactless usage. "It's that much easier than swiping the card through a reader," he says. "Whatever is easiest, whatever gets us through that line quicker, is going to be adopted in the long run."

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Gregory Taggart is a freelance business writer based in Orem, Utah.