(November 19, 2008) Nearly one-third of U.S. Bank customers who have been issued a contactless debit card have performed at least one contactless transaction since the bank’s program began in June, an executive with the bank said on Wednesday. “So far, it’s looking really promising,” Michael Shepard, group product manager for consumer credit and debit products at Minneapolis-based U.S. Bank, told an audience at the Bank Administration Institute’s Retail Delivery Conference in Orlando, Fla.

Between 25% and 30% of cardholders who have been issued a Visa payWave card to replace their U.S. Bank signature debit cards have performed a contactless payment, Shepard said. The bank has issued the cards, which have mag stripes but are also equipped with chip-and-antenna inlays that allow them to connect via radio waves with point-of-sale transceivers, in California, Colorado, Utah, and Missouri. Some 400,000 cards were issued as replacements to existing debit card holders, Shepard tells Digital Transactions News, adding that the bank has found that those who use the card once tend to be repeat users.

Cardholders have told the bank they like contactless transactions because of their speed, Shepard told the audience. The bank has also found other benefits from the young program. “[Cardholders’] image of U.S Bank has improved,” he noted. “They think we’re on the leading edge.”

The results come after more than three years of contactless-card rollouts by leading banks across the U.S. have seen low levels of adoption by cardholders. Shepard told his audience targeted issuance can improve results. Chiefly, this means concentrating issuance and marketing on segments, such as relatively younger customers, who are considered more likely to be aware of, and use, the technology. “People who are not likely to use it, don’t waste your time issuing to them,” he said.

Shepard said issuers must also weigh carefully the cost of contactless cards, which are generally more than a $1 more costly than conventional mag-stripe cards. “It is expensive,” he said in underscoring his point about the importance of selective issuance.