Issuers are mailing out contactless credit and debit cards by the millions, it's not clear how often they are being used.

Several payments executives say consumer interest in the technology is falling off, and they blame the banks' and card networks' apathy. Even the format's biggest backers concede they have sacrificed broad-based marketing, preferring to promote contactless cards in the cities and industries where they are most likely to be successful.

"Even if you do have a PayPass and/or a blink card, it's very unlikely that you know what it means," says Nick Holland, a senior analyst at Aite Group LLC. "They've just done a totally crappy job of pitching this. ... Merchants have told no one about it. Card networks have told no one about it. The issuers haven't really told anyone about it."

From the numbers, it would appear that contactless is booming. At the end of the third quarter of last year, MasterCard says more than 66 million of its contactless PayPass cards had been issued worldwide, up 50 percent from a year earlier. JPMorgan Chase, primarily a Visa issuer, has sent out 30 million of its blink-branded contactless cards to date, triple the number in 2007. The bank began issuing blink cards in 2005, and it is also adding contactless capabilities to cards it is reissuing to customers it acquired from Washington Mutual.

But while the companies boast about issuance, they are mum on contactless transaction volume, and their marketing push is nowhere close to the level of several years ago, when they began promoting the cards in earnest. Stuart Taylor, vp of global marketing for the terminal maker Hypercom Corp., says the lack of communication has hurt adoption.

Cathleen Conforti, MasterCard's svp for global PayPass solutions, says that MasterCard's nationwide marketing push has tapered off, but this is because the format is taking off, and there is now less need to educate people about how it works. Stephanie Ericksen, Visa's head of cross-product services, said her company is trying to build a "concentrated acceptance space" because a nationwide push is impractical. "We're trying to be more targeted," she says. "When we're rolling out a new technology, we do try to focus on a concentration of cards and terminals and merchants all being in the same area."

Merchants now have two choices if they want to accept contactless payments with an Ingenico terminal: add the module when they install the reader, or add it later. The hardware cost is the same in both cases-about $100- but labor costs go up sharply when adding the tech later because a technician must visit the store. To address cost, Ingenico is making the upgrade a do-it-yourself endeavor. Later this year, Ingenico terminals will ship with a cavity that allows merchants to add contactless capabilities simply by plugging in a module. Rivals VeriFone Holdings Inc. and Hypercom are similarly tweaking their hardware.


Daniel Wolfe is a reporter at American Banker.

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