E-commerce goes contactless

Banks, credit card companies and retailers jointly embrace wireless.

Season ticket holders can now use a cell phone to purchase items at concession stands in Philips Arena, home of the NHL's Atlanta Thrashers and the NBA's Atlanta Hawks. With the right gear in place, all a patron has to do is wave a phone at a transaction terminal, and the sale goes through.

Contactless payments are creating a buzz in the retail world. The technology lets consumers make purchases without establishing a physical connection between the payment device - plastic card, key fob or mobile phone - and the point-of-sale (POS) terminal. Account information is encrypted and transmitted wirelessly between the payment device, which contains an embedded smart chip and antenna, and the reader.

Early adopters are deploying contactless terminals to simplify payment processes in settings with high volumes of low-cost transactions, such as gas stations, convenience stores, fast-food restaurants and sporting arenas. In these places, cash transactions are often the norm.

That may change as the contactless payment industry grows.

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Season ticket holders can now use a cell phone to purchase items at concession stands in Philips Arena, home of the NHL's Atlanta Thrashers and the NBA's Atlanta Hawks. With the right gear in place, all a patron has to do is wave a phone at a transaction terminal, and the sale goes through.

Contactless payments are creating a buzz in the retail world. The technology lets consumers make purchases without establishing a physical connection between the payment device - plastic card, key fob or mobile phone - and the point-of-sale (POS) terminal. Account information is encrypted and transmitted wirelessly between the payment device, which contains an embedded smart chip and antenna, and the reader.

Early adopters are deploying contactless terminals to simplify payment processes in settings with high volumes of low-cost transactions, such as gas stations, convenience stores, fast-food restaurants and sporting arenas. In these places, cash transactions are often the norm.

That may change as the contactless payment industry grows.

"Contactless payments make the payment process easier and more convenient for consumers, who see benefits of shorter lines, cash-on-hand issue elimination and faster moving queues," says analyst Erik Michielsen, who is director of RFID and ubiquitous networks at ABI Research.

"Merchants benefit by increased average bill size, greater throughput, less cash handling and increased return visits," he adds. "Card issuers and associations benefit by tapping into the cash market and increasing top-of-wallet positioning against competitors."

With much to gain, merchants and card issuers have been working together with vendors that supply POS gear. For example, the project now in its pilot phase in Atlanta required cooperation from many parties, including Atlanta Spirit - parent company of the Hawks, Thrashers and Philips Arena - Cingular Wireless, JPMorgan Chase, Nokia, Philips, Visa USA and Vivotech.

During the pilot, season ticket holders can make contactless payments at concession stands and access mobile content. At checkout, patrons hold their phone near a secure reader, which receives the credit card payment information and processes the transaction in the same way it handles other card transactions.

To participate in the pilot, patrons need a Visa credit account issued by Chase, a Cingular Wireless account and a Nokia 3220 mobile phone outfitted with a semiconductor chip from Philips and POS software from Vivotech. These strict requirements limit participation. That's one of the reasons Bob Egan, director of emerging technologies at TowerGroup, calls the Philips Arena project in Atlanta "a science experiment."

For the most part, the technology is still in its infancy. There have been some highly publicized projects in Europe and Asia, and now projects are getting attention in the United States, Egan says. It's a complex undertaking, and people are trying to test the waters with some minimum investment, he adds. "Contactless payment systems on credit cards and on mobile phones are going to be a significant growth hormone to accelerate the velocity of money," Egan says. But it won't happen overnight.