Discover Financial Services has made its mobile contactless payment stickers widely available, but its method for distributing them could be repeating a mistake American Express Co. made years ago.
The credit card issuer allows any cardholder to sign up to receive a sticker with an embedded contactless payment chip. The sticker, called Zip, is meant to be adhered to a phone for mobile payments.
Discover, of Riverwoods, Ill., announced its plans in November, when it began issuing stickers to test users. Zip stickers are now available to any Discover customer, a Discover representative confirmed over its Twitter account.
Discover's distribution method, wherein any customer can opt in to receiving a contactless chip that would be used in non-card form, echoes Amex's strategy for its contactless ExpressPay key fobs, which it launched in 2002.
In 2008, Amex shut down the distribution of separate ExpressPay key fobs, citing a lack of interest among consumers, though it still builds contactless payment into some of its cards.
Thus, Discover's approach "is really not a breakthrough, and it has been used throughout the card industry for a while," said Brian Riley, a research director in the bank cards practice at TowerGroup. "The benefit of it is, it's a low-impact way of getting into the contactless business."
Adil Moussa, an analyst for Aite Group LLC in Boston, said that Discover's use of stickers is not substantially different from Amex's use of key fobs. The design for each was chosen to fit with the payment form the industry found sexiest for its time, he said.
"I mean, the sticker part is just so it can work with your phone," Moussa said. "At the time, the key fob was something everyone was thinking about … just from a psychology perspective, it's the same thing."
Farhan Ahmad, Discover's general manager of prepaid and director of emerging payments, said stickers are more than just a reshaped key fob or card.
A sticker "provides an incremental benefit on top of what a contactless card is," Ahmad said. "We think contactless stickers are a first technology until a time when phones come equipped with a chip inside them."
Amex did not return requests for comment.
Discover is also working on mobile payments in a separate venture, the Isis system, with the mobile carriers AT&T Inc., Verizon Wireless and T-Mobile USA.
Eventually, the group said, it hopes to let mobile phone users make payments with embedded near-field communication chips.
Observers say that by relying on contactless payments, Discover and others are working with a system that merchants have not universally adopted.
"Whether it's a sticker or some sort of insert like a microSD chip or some sort of embedded capability in a mobile device — for any of it to be effective you have to have the technology deployed to those consumers and merchants," said Beth Robertson, the director of payments research at Javelin Strategy and Research. "If it's just a one-side solution, it's not going to be valuable. You are not going to have the ability to use it with ubiquity."
That does not mean there is no hope for the technology in the future, despite the setbacks. Many industry players envision pairing mobile payments with rewards programs, allowing consumers to get discounts at the point of sale without having to clip coupons.
Riley said stickers can fulfill this promise even for users who do not always carry a mobile phone, since a sticker "can go anywhere it's attached."
