KeyBank says making its debit cards contactless will help the technology take off in the fast food and convenience store markets.
Proponents of the technology also say the cards are quickly becoming fashionable among younger consumers and have additional appeal for security reasons.
The unit of Cleveland's KeyCorp announced this month that next month it will become the first issuer to add MasterCard International's contactless technology, PayPass, to its debit cards. The bank has around 2 million debit cards in circulation, and over time all its debit cardholders will get PayPass-enabled cards.
PayPass is accepted mostly at fast-food restaurants, convenience stores, and movie theaters, where transaction amounts tend to be less than $25 and customers want to move through the line quickly. Consumers also tend to favor debit for small transactions.
Merchants that currently accept PayPass "are focused on the under-$25 transactions," said Carl Stauffeneger, the senior vice president of product management for KeyBank unit's consumer product development division. Using the new cards "won't slow down the merchants."
KeyBank outsources its credit card business to Citigroup Inc. and has held some discussions about having its credit cards converted to PayPass, too, he said. A Citi spokeswoman said it has no such plans.
One feature customers will like about the new debit cards is that "the card never has to leave the customer's hand," Mr. Stauffeneger said. Customers will view that as a security feature, he said. Another feature issuers are discovering about such cards: "Younger folks find them cool," he said.
Executives at some fast-food merchants, including Wendy's International Corp. and Burger King Corp., have
But Axalto Inc. of Austin, a manufacturer of the cards, said the coolness factor is already pushing them to the top of the cardholder's wallet.
"There is a hip factor, I am sure about that," said Paul Beverly, the president of Axalto Inc., a unit of the Dutch company Axalto Holdings NV. "When you speak with issuers and the associations, focus groups they have done" have found customers speaking of finding the cards trendy.
Meijer Stores Inc., a Grand Rapids grocery chain that has installed PayPass terminals at all its 171 stores, says the cards will become trendy with its typical customer, as well. "After 30 or 40 minutes in our store with the kids, the last thing you want is to be held up in the checkout lane," said Michael Ross, a Meijer spokesman.
The grocery chain's tests indicated that shoppers would save 15 to 20 seconds on a typical transaction by using the cards, he said.
Since October, Meijer has issued 500,000 cobranded credit cards with GE Consumer Finance. Over time PayPass contactless chips will be added to those cards, Mr. Ross said. Mr. Beverly said industry statistics indicate that there will be 35 million contactless cards in the United States by next year.
Michael Abbott, a vice president of marketing at GE Consumer Finance, which will begin issuing Meijer PayPass MasterCards this month, said his company has been looking at ways to use contactless cards for some time. "It is all about driving in-store sales for our partners," Mr. Abbott said. "With all the noise around identity theft," the cards have considerable appeal to consumers, who like the fact that the cards never leave the owner's hands. "This won't be one of those things that set the world on fire, but as consumers adopt it, they like the idea, and it will bring them back" to shop in stores that accept them.
Retailers that issue cards have shown "moderate" interest in contactless technology, he said. "It is starting to perk up but is on the early side of the adoption curve."
