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Cashless payments: quicker and safer

By Catherine Tsai in Denver
June 23, 2005 16:05 IST
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Quicker. More secure. More fun. Stores, credit card companies and banks are giving consumers new ways to pay in the latest evolution of cashless payments.

Chase Bank recently rolled out credit cards with "blink" technology that lets users wave their cards near a computer reader instead of having to swipe them through a device. Cards never leave customers' hands.

Visa, MasterCard and American Express all have been exploring so-called contactless technology, whether with cards or keychain fobs.

And companies using biometrics like BioPay and Pay By Touch are signing up customers who want to use their fingerprints to access checking accounts.

For now, merchants accepting the Chase cards typically are conducting small transactions that don't require customers' signatures, raising the risk they may be accepting stolen cards.

John Gould, director of bank card research for the consulting firm TowerGroup said the risk is minimal since most missing cards are reported quickly, banks and credit card companies pick up on unusual card use that can signal a stolen card, and thieves typically don't use stolen cards for small buys.

Gould said he expects there to be tens of millions of cards with contactless technology next year.

"In 2015, the magnetic stripe will be a piece of history," he said.

Privacy groups like the Electronic Privacy Information Centre are urging Congress to make sure safeguards are in place as technology evolves.

"In some cases biometrics can improve the authentication of individual users, but if that is compromised, then there are real problems," said Marc Rotenberg, executive director of the centre.

Companies say contactless technology and biometrics will speed up checkout lines and tighten security to stay a step ahead of crooks.

BioPay enrollees who have signed up for the system with a photo identification, a blank check from a bank account, and a scan of their index fingers can pay by punching in an ID number and scanning their fingerprints instead of using a card.

In Colorado, Chase expects to have 1 million cards with "blink" technology in circulation in the next several months. Customers in Georgia also are getting the new cards.

The cards have chips with radio-frequency identification tags, or RFID. A special reader picks up information from the card when it's within an inch. It's the same technology used in toll collection passes like E-ZPass and with product tags to help retailers track inventory.

The new card readers typically cost $150 to $200, said Tom O'Donnell, a Chase senior vice president.

"It's all designed to get customers through lines faster," Jeffrey Green, editor of Cards&Payments magazine.

Part of the speed advantage comes from not requiring signatures from customers, so it's possible a crook could get away with using a stolen card.

The Bailey Co., a franchisee of Arby's, isn't concerned.

"Any transaction under $25, we don't take a signature. It's no different than it is now," operations controller Jeff Gordan said, noting most people report missing cards before they can be misused.

The technology can shave 10 seconds from the drive-through window experience, helping Arby's restaurants meet goals to get customers past the window in 60 seconds or less, Gordon said.

Because the cards with RFID never leave customers' hands, they also will solve the problem of people driving away without their cards, Gordan said.

There are other benefits for companies to speed up transactions, besides giving consumers what Gould calls "the fun factor" of a new way to pay.

"When someone uses a piece of plastic they spend more, so there's an uplift," Gould said. "They're combining the uplift of credit with the speed and convenience of new technology."

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Catherine Tsai in Denver
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