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."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.The challenge is combining two emerging industries - contactless payments and mobile phone systems - in a beneficial way. Collaboration is critical."Everybody needs to get around the table and understand their roles and responsibilities. They need to be very objective and heads-up about understanding the complexities of implementation and integration, and put some good policies in place around execution governance - understanding who's doing what, when, where and how," Egan says. Risk management becomes a really big deal, he adds.Search for standardsDespite the hurdles, the consumer payment systems industry's Nilson Report estimated last May that there will be between 15 million and 20 million Visa and MasterCard contactless chip cards in the market by the end of 2006. Card issuers have launched several high-profile projects in the last 12 months: Last May Chase announced its "blink" contactless consumer cards, based on the Visa and MasterCard contactless payment technologies, which it's rolling out in Atlanta and Denver. Last August Citibank announced its plan to roll out 2.5 million contactless MasterCard debit cards and key fobs across the country. Last fall, MBNA started issuing MasterCard cards that can be used in Seattle's Qwest Field and Baltimore's M&T Bank Stadium. In addition, American Express has begun issuing Blue Cards with contactless payment technology nationwide.IT vendors working on contactless POS options include Hypercom, Ingenico, On Track Innovations and Vivotech. Among the retailers that have been experimenting with contactless payments are 7-Eleven, AMC Theaters, CVS, McDonald's, Regal Cinemas, Ritz Camera, Subway and Wawa.From the beginning, the major credit card companies have been developing their own services for processing contactless payments: American Express has its ExpressPay, MasterCard International has PayPass and Visa has its Contactless products. Each is based on ISO\/IEC 14443, the international standard for contactless smart chip technology.Lately, however, these companies have been working to share technologies. Last March, for example, MasterCard and Visa announced an agreement to share a common communications protocol and associated testing requirements for contactless payments. The protocol is based on MasterCard's PayPass ISO\/IEC 14443 implementation specification, says Cathleen Conforti, senior vice president and PayPass global product manager at MasterCard. "The use of a common protocol for conducting contactless payments will enable vendors to streamline product development and testing, leading to reduced implementation costs and faster time to market for financial institutions and merchants," Conforti says. As standards emerge, retailers will be able buy POS gear knowing it will be able to handle contactless payment transactions for multiple credit-card providers. Vendors will have to develop and support only one communications specification, making the manufacturing process easier and less costly, she adds.At the same time, MasterCard, Microsoft, Motorola, Nokia, Sony, Visa and other companies are backing a wireless communications protocol called Near Field Communication (NFC). NFC technology is based on or compatible with existing ISO standards, including ISO\/IEC 14443. One hallmark of NFC is its short range - a couple of inches.That's one way in which contactless payment devices differ from radio frequency identification (RFID) tags used in supply-chain settings. For security reasons contactless payment devices are designed to operate close to a POS terminal. RIFD tags have a less-restricted read area and typically contain only an item identification number that's linked via back-end systems to more-detailed supply-chain data. In the big picture, it's not just purchases that the NFC network will enable: For example, backers envision that consumers will be able to download a movie or song clip by holding an NFC-enabled phone in front of a billboard or poster with an embedded NFC tag. As such deployments take off, more than 50% of mobile handsets will incorporate NFC chips by 2010 to enable short-range transactions, ABI Research predicts.