Card companies are betting that if they stimulate consumer demand for mobile payments, it will spur the phone networks and manufacturers to move faster on improving the technology.
First Data Corp. plans to begin selling its mobile payments "Go-Tags" on racks at a handful of retail chains around the country this summer to drum up consumer interest.
The company also has struck a deal with Visa Inc. to expand merchant acceptance of these contactless stickers, which can be attached to mobile handsets or other devices for use at the point of sale. MasterCard Inc. announced last month that it had a similar alliance with Blaze Mobile Inc. of Alameda, Calif., which also makes contactless stickers.
All these companies say they view the stickers as a stopgap technology until near-field communications chips are incorporated into the handset itself. But Barry McCarthy, the president of product innovation at First Data's commercial services unit, said that if payment companies encourage consumers to use their phones as payment devices, they in turn will demand that network operators and handset manufacturers integrate the feature into the phones.
"Until we have something inside the phone, the step in between is using something on the phone," he said. "We think we can kick-start this market."
In a pair of internal trials, First Data, a portfolio company of the investment firm Kohlberg Kravis Roberts & Co., found that consumers were quick to accept the stickers as a more convenient form of payment, McCarthy said.
A year ago the Denver company began offering the tags to its employees at its Denver corporate campus and its Hagerstown, Md., center in conjunction with the French facilities management company Sodexo, which runs the company cafeteria. The "SoGo" tags, set up as closed-loop reloadable prepaid accounts, could be placed on an employee badge, cell phone, or any other portable object and did not require employees to carry their purses or wallets.
Users of the tags visited the cafeteria 30% more often and spent 10% more money per visit, McCarthy said. What was most encouraging, he said, was that 96% of the workers preferred to use the tag exclusively, rather than a conventional card.
"We have a once-in-a-lifetime opportunity to truly re-architect how this works in the consumer's mind," McCarthy said.
Sodexo has begun offering the program at other facilities it manages around the world, he said.
Michael D. Capellas, First Data's chief executive officer, said in an earnings call last month that the agreement with Visa "greatly increases the reach of our Go-Tag product. As a result, we have signed a number of large nationwide merchants who will both distribute Go-Tags and accept them for payment. We will be announcing these shortly."
McCarthy said the tags will be linked to a reloadable prepaid account and sold at merchants in package along with a conventional card. The company also plans to seek banks to act as issuers.
MasterCard's Canada unit announced Thursday that it had completed a mobile payments trial with Citigroup Inc.'s Canadian cards unit and BCE Inc.'s Bell Mobility, the nation's largest telecom.
Scott Lapstra, the vice president of market development at MasterCard Canada, said the trial showed frequent usage by several hundred participants, with average transactions just under $20, indicating substitution for cash.
"We still need to see commercial availability of NFC-equipped mobile phones," Lapstra said. "That will be the real next step that leads to commercialization of mobile" payments. Such phones are not likely to be widely available before the end of 2010, he said.
