Discover Financial Services is trying to broaden adoption of its contactless payment technology while it works with large wireless carriers on a new mobile payments system.
The Riverwoods, Ill., credit card issuer said Monday that it had begun sending its Zip contactless cards and payments stickers to "select" cardholders on Nov. 15 and will roll out the products to its wider customer base starting in January.
"Contactless is a good step to something that's going to be more significant in the future," Mark Scarborough, Discover's senior vice president of cardholder marketing, said in an interview Monday.
Discover is working with AT&T Inc., Verizon Wireless and T-Mobile USA on starting a mobile payments network to be called Isis, which the carriers announced Nov. 16. The plan is eventually to let people use mobile phones with embedded near field communication technology to make payments at the point of sale as well as to store other payment products, such as loyalty cards and coupons.
Industry experts consider contactless cards and, more specifically, payments stickers to be a bridge to more advanced forms of mobile payments.
Citigroup Inc. already issues contactless stickers to some of its credit card holders. And Bank of America Corp. last week said it plans to begin issuing contactless stickers to holders of some of its credit and debit cards next year.
Issuing contactless cards and stickers "is foundational to mobile payments using NFC," said Richard Crone, the chief executive of Crone Consulting LLC in San Carlos, Calif. Such a move is an attempt by issuers to protect their "competitive boundary," he added.
"The one who loads the chip on the card is the one who controls the chip on the card," Crone said. Discover began testing its Zip contactless stickers in early 2009 with more than 700 employees at its facilities in Riverwoods and Salt Lake City, according to a white paper the company released.
Scarborough declined to say how many Discover cardholders now have contactless cards or stickers.
The company has worked with merchants to certify their point of sale terminals to accept Zip contactless cards and stickers for payments, Scarborough said. More than 100,000 merchant sites are equipped to accept the payment type, the company said.
It is taking a regional approach to expanding merchant acceptance, focusing on the San Antonio and Salt Lake City areas first, Scarborough said.
Discover cardholders interested in receiving a contactless card or sticker can request one by calling the company.
Though contactless payment stickers are a logical step forward, demand for such products may be limited in the long run, experts said.
"These recent announcements about contactless stickers are a way for issuers to show consumers and the market that they have some activity with mobile at a time when there is a great deal of talk about mobile and new technology in development," said Megan Bramlette, a director at Auriemma Consulting Group. "In fact, stickers do not turn a phone into a mobile payment device, and I doubt most people will stick them onto their $400 iPhones."
