Season ticket holders can now use a cell phone to purchase items at concession stands in Philips Arena, home of the NHL\u2019s Atlanta Thrashers and the NBA\u2019s 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 \u2014 plastic card, key fob or mobile phone \u2014 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.\u201cContactless 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,\u201d says analyst Erik Michielsen, who is director of RFID and ubiquitous networks at ABI Research.\u201cMerchants benefit by increased average bill size, greater throughput, less cash handling and increased return visits,\u201d he adds. \u201cCard issuers and associations benefit by tapping into the cash market and increasing top-of-wallet positioning against competitors.\u201dWith 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 \u2014 parent company of the Hawks, Thrashers and Philips Arena \u2014 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\u2019s one of the reasons Bob Egan, director of emerging technologies at TowerGroup, calls the Philips Arena project in Atlanta \u201ca science experiment.\u201dFor 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\u2019s a complex undertaking, and people are trying to test the waters with some minimum investment, he adds. \u201cContactless payment systems on credit cards and on mobile phones are going to be a significant growth hormone to accelerate the velocity of money,\u201d Egan says. But it won\u2019t happen overnight.The challenge is combining two emerging industries \u2014 contactless payments and mobile phone systems \u2014 in a beneficial way. Collaboration is critical.\u201cEverybody 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 \u2014 understanding who\u2019s doing what, when, where and how,\u201d Egan says. Risk management becomes a really big deal, he adds.Search for standardsDespite the hurdles, the consumer payment systems industry\u2019s 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 \u201cblink\u201d contactless consumer cards, based on the Visa and MasterCard contactless payment technologies, which it\u2019s 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\u2019s Qwest Field and Baltimore\u2019s 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\u2019s, 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\u2019s PayPass ISO\/IEC 14443 implementation specification, says Cathleen Conforti, senior vice president and PayPass global product manager at MasterCard. \u201cThe 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,\u201d 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 \u2014 a couple of inches.That\u2019s 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\u2019s linked via back-end systems to more-detailed supply-chain data. In the big picture, it\u2019s 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.