Will contactless payment cards connect in the U.S.?
By Gregory Taggart • Bankrate.com

The magnetic strip on the back of your credit card is beginning to share its plastic real estate with an embedded radio chip that will change the way you pay for goods and services at the point of sale. At least, that's what its proponents hope.

Contactless payment, which is what the radio frequency identification, or RFID, chip makes possible, allows cardholders to simply hold their credit or debit cards within an inch or two of a card reader to complete a purchase transaction. No more swiping the card through a reader. No more handing your card to the clerk. No more contact.

Contactless payment cards:

Chase introduced contactless payment technology in its cards in 2005. The RFID chip is embedded in the center of the card.

If you've ordered a meal at the drive-through at Arby's, purchased your morning coffee at the corner 7-Eleven or attended a movie at a Cinemark theater, you've probably seen a contactless card reader, maybe even used one. However, if you don't live in New York, Connecticut, Denver, Atlanta or one of the other areas where American Express, Bank of America, Chase, Citibank, Key Bank, Wells Fargo and other card issuers have done pilot programs, you probably don't have a contactless card yet. In fact, just 7 million of JP Morgan Chase's 90 million cardholders have Chase's card with Blink, that bank's version of contactless.

Don't let location stop you, says Scott Rau, senior vice president of payments at JP Morgan Chase card services division. "If you're a Chase card member that lives in Utah, for example, and you want a card with Blink, just call and ask for a card."

Merchants needed
Contactless card in hand, you'll find around 30,000 merchant locations where you can use it, from locally owned cafes to major chains such as KFC and McDonald's. Nevertheless, the number of merchants accepting such transactions is small, relative to the roughly 5 million merchant locations in the United States.

Of course, the number of accepting merchants should increase as the rollout proceeds, according to Michael Friedman, director of emerging technologies at Mercator Advisory Group, a research firm focusing on the payments industry. "Card issuing has been pretty heavy, and merchant acceptance has been pretty good," he says. But there's work yet to do. "I've talked with clerks on the spot at stores that use contactless readers in Connecticut, and their responses really varied. Some said that a third of all card transactions are now contactless; others said, 'You're the first person I've ever seen use it.'"

For the merchant, the sizzle of contactless is speed, particularly at high-volume, cash-driven locations such as movie theaters, fast-food vendors, sports venues and mass transit. Checks and magnetic-strip cards take more time, resulting in long lines. With a contactless card, purchases under $25 don't require a signature and flashing the card in front of the reader is said to be noticeably faster. "What we found is that contactless transactions are an average of 25 percent faster than cash," says Elvira Swanson, Visa's director of corporate relations. "That might not be significant to the average consumer, but for the fast-food merchant, that's a significant time savings, especially spread over all their customers."

Of course, transaction speed is attractive to customers, as well, especially if they're used to standing in line behind three or four people writing checks. "You could be there all day," Friedman says. "But if those three people are using contactless, you'll get through the line much faster."