Report: 2005 Will Be a Breakthrough Year for RFID Payments

This will be a year of substantial deployment for contactless payments based on radio-wave technology as card networks roll out programs and merchants find the systems perform as promised, a new research study says. “Merchants are finding it works,” says Erik Michielsen, director for RFID and ubiquitous networks at ABI Research, Oyster Bay, N.Y., and author of “RFID Contactless Payments,” an ABI report. The report contains specific projections for contactless transactions this year, which Michielsen says are proprietary to the report, but his research indicates 2005 will be a “transition year” for the technology, with a “sharp increase” in deployments, according to an ABI press release. Driving the growth, Michaelsen says, is the increasing involvement of major banks and merchants in RFID projects and rollouts, as well as the migration of the technology from proprietary networks, such as ExxonMobil Corp.'s Speedpass system, to open systems run by the bank card networks and American Express Co. RFID technology, which speeds up card transactions by replacing card swipes with radio signals between cards (or cell phones or keyfobs) and terminals, has its greatest potential use among high-throughput merchants that accept mostly cash, such as fast-food outlets. Banks, Michielsen says, like RFID's potential to move traditionally cash payments to cards, while merchants see an opportunity to introduce higher-ticket card payment without slowing down service and to tack on loyalty programs. “I spoke to dozens of folks on both sides of the equation,” Michielsen says. “Companies are really seeing this as an opportunity.” Banks, merchants, and card companies are also reacting to consumer preferences, adds Michielsen, who says RFID makes for a “smoother payment process” for consumers. “It's an easier point-of-sale experience for consumers,” he says. “It reduces queues, and it doesn't involve the transfer of a card or cash to a clerk.” The need to respond to such preferences, he says, has led to the involvement of major companies like McDonald's Corp. and MBNA Corp. The fast-food chain is expected to roll out MasterCard International's PayPass contactless program to all or most of its restaurants this year, while MBNA is issuing PayPass-enabled cards as part of its co-branding arrangements with the three National Football League teams. Holders of the cards will be able to buy concessions using PayPass during the football season at the stadiums of the Baltimore Ravens, Seattle Seahawks, and Philadelphia Eagles (Digital Transactions News, Feb. 22). RFID-enabled cards carry chips with inlaid antennae. So equipped, the cards, when waved in close proximity to POS terminals equipped with radio receivers, can transmit card-account data to the terminals. Once the terminals receive the signals, transactions proceed as if a card had been swiped. AmEx has introduced similar technology for keyfobs as well as cards, while MasterCard piloted a PayPass application in 2003 involving cell phones.