Contactless credit cards have long faced a chicken-and-egg problem: merchants hesitant to install the necessary card readers, issuers reluctant to distribute the cards until consumers can use them in more places.
JPMorgan Chase & Co. took a big step toward solving the conundrum last week by announcing that it would issue millions of contactless cards over the next year, and several major merchants are apparently eager to support them.
Jeff Lenard, a spokesman with the National Association of Convenience Stores, an Alexandria, Va., trade group, said merchants whose customers want to pay fast will almost certainly adopt the cards.
"If there is a payoff in terms of increasing the speed of the transaction, I guarantee convenience stores will be there, because their customers will expect it," Mr. Lenard said.
McDonald's Corp., which had been testing contactless cards in a small number of its restaurants, said last week that it plans to install readers in most of them in this country by yearend. And 7-Eleven Inc. said last week that it is working with JPMorgan Chase, will soon begin testing the readers in 170 of its stores, and expects to install them in all 5,300 eventually.
Mr. Lenard said that the average convenience store visit - from parking the car to leaving the store - takes less than four minutes, and that people tend to become irritated with anything that slows them down. "Above all, convenience stores sell time, and anything that can enhance the customer's experience in relation to transaction time is a good thing," he said.
7-Eleven is the nation's largest convenience store chain, Mr. Lenard said, and its decision about contactless cards will probably encourage others to consider the technology.
Contactless cards use radio-frequency identification to transmit the user's account number to a reader. JPMorgan Chase said its research indicates that the transactions are up to 20 seconds faster than cash payments.
Thomas O'Donnell, a senior vice president in JPMorgan Chase's credit card unit, said the New York company will issue both Visa and MasterCard contactless credit cards to all customers in two cities next month - Atlanta is the first, the second has not been named - and nationwide next year.
Mr. O'Donnell said the company may also issue contactless debit cards in the future.
Though the card readers cost about $100 to $150, pilot tests show that consumers are often willing to spend more with the cards than if they were using cash - making a "very clear business case" for merchants, Mr. O'Donnell said.
Both Visa U.S.A. and MasterCard International have developed contactless payment systems. Though readers can process payments for both cards, merchants must buy different software for each card.
McDonald's will accept MasterCard PayPass cards, and 7-Eleven is going with Visa's contactless cards.
JPMorgan Chase, which will offer both cards under the product name Blink, plans a major marketing campaign.
"We are making a significant investment, not the least of which will be issuing millions of cards that are Blink-enabled, and at the same time pointing our customers to use their card at merchants where they can Blink a transaction," Mr. O'Donnell said.
Sheetz Inc. of Altoona, Pa., which has 315 convenience stores in several eastern and midwestern states, has agreed to be JPMorgan Chase's first cobranded contactless card partner. Its stores have been accepting PayPass cards for several months.
Rich Steckroth, Sheetz's manager of new business development, agreed that convenience stores will probably be strong endorsers of the technology. His company's view is that contactless cards will become ubiquitous sooner or later, he said.
The card "talks about two things: customer convenience and our corporate philosophy of being first to market," Mr. Steckroth said. "The business case is all about speed, convenience, and getting customers in and out quickly."
Ariana-Michele Moore, a senior analyst at the Boston market research firm Celent Communications LLC, said that contactless cards are being positioned mainly for merchants that benefit from fast transactions, and that this narrow strategy could help the format take off.
"Instead of marketing it as a replacement for a regular credit card, they are targeting cash-based markets," Ms. Moore said.
Getting merchants to upgrade their credit card terminals might be difficult, she said, but they are probably getting help with the cost. "You can assume early adopters will be given better discount rates and, I assume, some type of assistance with terminals."
Mr. O'Donnell would not say whether JPMorgan Chase was helping to pay for merchants' terminals.
Richard Lautch of Starbucks Coffee Co. is not sold on the idea. Mr. Lautch, who is the company's treasurer and a vice president, said at a conference last week that cash payments are by far the cheapest to process, costing about a tenth as much as a payment-card sale.
Standard credit card payments "do provide some speed of service," but the benefit does not overcome the higher cost, he said.
Though contactless payments are even faster, Mr. Lautch said he is still on the fence. "We have not yet seen RFID in a form that makes sense to us," he said, "but we are interested."
No other major issuers have said they intend to issue contactless cards widely. Citigroup Inc. and MBNA Corp. participated with MasterCard in a pilot test in Orlando. Citi would not discuss its plans, and MBNA is sticking with its strategy of issuing PayPass cards to people within specific locations, such as sports stadiums and college campuses.
