A handful of banks have begun experimenting with contactless card payments, but ExxonMobil Corp. has a big head start, thanks to its Speedpass Network, which is up and running at about 10,000 of its 16,000 gas stations as well as some key retailers.
"Our vision is to make Speedpass a ubiquitous form of customer identification and payment over time," said Joe Giordano, the vice president of business and product development at the network, in Fairfax, Va. "We envision it to be a universal brand."
Speedpass is an undeniable leader in contactless cards, an emerging niche of smart cards that transmit payment information through radio frequency. Often available in the form of small fobs or wands that can be kept on key chains, they initiate transactions by being waved in front sensors on readers, eliminating the need for swiping or signing. Though smart cards have failed to gain traction as security enhancers or enablers of loyalty programs, they are catching on as contactless cards.
In at least two respects, Speedpass is positive for banks. It is linked to users' existing credit or debit cards, so ultimately a card-issuing bank processes the transactions. And it targets outlets that specialize in small transactions, in which cash remains prevalent, despite bank efforts to displace it.
"Consumers have been reluctant to use credit cards for low-value transactions, but somehow there's not that same perception when using Speedpass," said Les Reidl, an executive vice president at Speer & Associates of Atlanta. Speedpass is giving banks a beachhead for pushing debit and credit cards into these purchases, Mr. Reidl said.
Mr. Giordano said some banks are using Speedpass to boost transaction volume through special offers and other marketing promotions. Customers tend to use their Speedpass-linked cards more, "so banks realize a tremendous revenue shift," he said.
ExxonMobil has blanketed its high-volume outlets with Speedpass readers and moved into the fast-food and grocery store markets. In 2001, it installed readers at more than 400 McDonald's Corp. restaurants in Chicago and in February introduced an improved version in three Stop & Shop Cos. supermarkets in Boston. There are also plans to enter the drug store market.
Speedpass is as much a customer identification system as a payment system, Mr. Giordano said. It is not subject to the same privacy restrictions as financial institutions so it can freely pass along demographic data about users to its retail customers.
Yet it is unclear what kind of a threat it poses to banks. Some are working on competing products. J.P. Morgan Chase & Co., MBNA Corp., and Citigroup Inc. are cooperating on a pilot for a MasterCard International Inc. contactless card in Orlando, while Bank of America Corp. and American Express Co. are developing ones of their own.
One big question is how Speedpass could affect customers' perceptions about card purchases. As Speedpass becomes available in more places, for instance, users may come to think of their bank card as a gas card, which would diminish their ties to their banks.
"Anyone who owns the consumer front end has power," said Avivah Litan, a vice president and research director at Gartner Inc. of Stamford, Conn. Speedpass may be in a position, for example, to steer customers away from some card-issuing partner banks and toward others that give it a greater share of the revenue generated.
But to Mr. Giordano, multiple payment relationships are a fact of life. "Speedpass can have a relationship with the consumer, and that doesn't mean that banks can't have a profitable relationship as well," he said. Banks still have many customer touchpoints, such as monthly billing statements, he said.
The technology is already available on certain models of Timex watches and the company has in mind all sorts of other front-end devices that customers will use without ever coming in contact with the Speedpass brand.
Speedpass-enabled Timexes are selling much more than other watches in the same style, Mr. Giordano said.
But anything could happen. Mr. Giordano, who masterminded the Speedpass concept in 1994, said that in its early days no one thought of it as a customer identification and payment system for other retailers. Rather it grew out of a marketing effort to make Mobil Corp. the fastest place to buy gas, he said.
An upgrade introduced in February expanded payment capabilities by allowing customers to debit funds directly from their checking accounts. When enrolling, users provide their account and bank routing numbers. The upside for consumers, Mr. Giordano said, is that they do not have to worry about any debit card fees.
A personal identification number protects the accounts. "No customer has ever lost a penny on Speedpass," Mr. Giordano said.
For now, the volume of contactless card transactions is so low that Speedpass may not look like a threat. And even if the technology becomes hugely popular, banks still have some pull. "The advantage the banks have is their existing relationships with the merchants," said John Grund, a partner at First Annapolis Consulting Inc. in Baltimore.
"We're very confident," Mr. Giordano said. "Because we come from the retail world and because we're focused on the end consumer, we have some advantage in the marketplace."
