(August 24, 2005) Citigroup Inc. plans to roll out 2.5 million key fobs for contactless debit card payment following a launch of the technology this fall in the New York area, the banking giant announced today. The so-called tap-and-go transaction devices will fit on consumer's keychains, and will be based on MasterCard International's PayPass radio-frequency-identification platform. The bank also said it will start a pilot of PayPass for its credit cards this fall, though it left unclear whether this pilot will also involve key fobs.

Citi's PayPass launch represents the first major rollout of contactless payment technology on a form factor other than cards, and is also the second announced so far linked to debit cards. KeyBank earlier this month said it would begin issuing MasterCard debit cards equipped with PayPass technology in September. American Express Co. has experimented with keychain devices for its ExpressPay RFID platform, and MasterCard two years ago piloted PayPass-equipped cell phones in the Dallas market. But until Citi's announcement all product launches by the major card networks, including AmEx, MasterCard, and Visa U.S.A., have involved embedding the chip-and-antenna inlay on which contactless technology depends in cards rather than other form factors.

The Citi-issued keyfobs are companions to the bank's Citibank Banking card, which can function as a signature- or PIN-based debit card. Customers will receive the devices in the mail, along with a new card, as the program rolls out. To activate the devices, they can call a bank customer-service line or use the debit card at any ATM. Citi says transactions under $25 on the debit devices at certain outlets will not require a signature, a tack both MasterCard and Visa introduced earlier this year to encourage contactless usage at fast-food and other stores. The keyfob payments will also be eligible to earn points in Citi's ThankYou network rewards program, though the bank is capping daily spending at $150, a move that should encourage usage on small-ticket purchases.

With contactless payment technology, customers wave or tap a transponder device—again, usually a card—on or near a transceiver linked to a point of sale device. By replacing conventional card swipes with radio signals, the technology speeds up tender times, making card payments more practical for high-throughput locations. AmEx, MasterCard, and Visa have agreed to adhere to the same international technology standard for contactless, which means readers can accept devices operating on any of the three platforms.