U.S. Bank Pairs a Rewards Card With iPhone-Based NFC Payments in Two Test Cities

U.S. Bancorp is joining the ranks of banks and tech companies testing near-field communication (NFC) technology by pairing a rewards credit card account with Apple Inc.’s iPhone in Salt Lake City, Utah, and Portland, Ore.

The Minneapolis-based banking company is offering new holders of its FlexPerks Travel Rewards Visa Signature card a sleeve for the iPhone 4 and iPhone 4S. The sleeve contains a secure element embedded into a so-called microNFC chip, and an antenna that facilitates payments by communicating with contactless point-of-sale terminals. Unlike a small but growing number of smart phones running Google Inc.’s Android operating system, the iPhone does not have a built-in NFC chip. With the sleeve and U.S. Bank’s new Go Mobile app, cardholders will be able to use their iPhones to make purchases at any merchant location that accepts the contactless Visa payWave card.

Cardholders won’t have to pay for the case, which is made by DeviceFidelity Inc., a Richardson, Texas-based technology supplier in the mobile contactless niche. The case  includes a battery that extends the iPhone’s charge time by more than 50%, a feature U.S. Bank says will appeal to frequent travelers. The card itself is free in the first year but afterward charges a $49 annual fee.

U.S. Bank, one of the nation’s more tech-oriented big banks, already has offered the FlexPerks card with a Europay-MasterCard-Visa (EMV) chip so that international travelers can use their cards easily in EMV countries, which is now most of the industrialized world. The new test is part of an effort to learn how consumers and merchants take to NFC, according to Dominic Venturo, chief innovation officer, U.S. Bank Payment Services.

“We understand it won’t initially be for everybody, but we believe mobile will be an important part of payments for customers in the future,” Venturo tells Digital Transactions News.

Some major players in mobile payments, notably PayPal Inc., Square Inc. and Starbucks Corp., are using non-NFC technologies such as browser-based systems or 2-D bar codes. NFC is a high-capacity, fast technology, but skeptics cite its need for chip-equipped phones and POS terminals as reasons to use other technologies.

Venturo, however, says bar codes aren’t quite as fast as NFC, which he adds is very secure. “Every one of these technologies has its benefits and weaknesses,” he says. “In its current iteration, I think it’s safe to say NFC is the most advanced.”

And while still small considering that the U.S. has about 8 million card-accepting locations, Venturo says the number of locations capable of taking contactless cards, which means they can accept NFC payments, is now up to about 300,000 and growing. Earlier estimates had the number in the 200,000 to 250,000 range. Venturo did not have specific data about contactless acceptance in Salt Lake and Portland.

U.S. Bank picked the two cities for the NFC test because of their tech-oriented populations and previous experience with high-tech card or Internet systems, according to Venturo. Salt Lake City, for example, is one of the two test cities for Isis, the NFC mobile-payments joint venture of AT&T Mobility, Verizon Wireless and T-Mobile USA. Also, the Utah Transit Authority, the Salt Lake area’s mass-transit system, already accepts contactless cards. Google, meanwhile, picked Portland as its first test site for Google Offers, a competitor of Groupon Inc.’s daily-deal offers now available in about 40 cities.

U.S. Bank has no end date for the test and in fact considers it a limited rollout that may expand later this year. Venturo won’t say how many FlexPerks cardholders the bank expects to take the NFC option, but adds, “We’re optimistic it will go well.” U.S. Bank plans to heavily promote the card in its 111 Portland and 54 Salt Lake-area branches, and through some direct marketing.

Minnetonka, Minn.-based Datacard Group will supply personalization technology for the FlexPerks smart card and NFC chip.

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