Visa U.S.A. Inc. has introduced what it calls the first general-purpose prepaid card with a contactless payment chip.
The cards, which MetaBank of Storm Lake, Iowa, began issuing this month, use radio frequency identification chips to transmit financial information to a payment terminal, the San Francisco card association said Wednesday.
Contactless prepaid cards in closed-loop environments have been around for a decade, notably in mass transit systems.
Todd Brockman, vice president of prepaid products for Visa, said in an interview that the card was the first of its kind to run on an open network.
Visa says that contactless transaction volume has grown an average of 34% each month over the last year, with an average transaction value of about $17.
Mr. Brockman would not give specific volume numbers, but he said that the cards would be popular in places such as fast-food restaurants and convenience stores, where “people are using prepaid cards today.”
Contactless capabilities also could be added to reloadable products such as the Visa Buxx teen card and payroll cards, both of which have significant market share, he said.
Elvira Swanson, a Visa spokeswoman, said merchant demand for the technology is beginning to rise, with retailers calling their acquiring banks to ask for contactless terminals in their stores.
Bruce Cundiff, an analyst for Javelin Strategy and Research of Pleasanton, Calif., said that this “evolution” of the card industry “is not going to drive acceptance growth, but it can’t hurt.” Contactless payments will take off when issuers incorporate the payment mechanism into a mobile phone or other portable electronic device, he said.
Ms. Swanson said that Visa eventually will include contactless payment technology in mobile devices. “Visa looks at contactless as a steppingstone to a mobile future.”
Mick Conlin, vice president of business development for Meta Payments Systems, said it is too soon to predict whether people will take to the combination of contactless and prepaid capabilities. The success of that combination will “be determined a bit with the market demand.”
Meta Payments is a division of Meta Financial Group. The division specializes in prepaid products and markets them to small and midsize institutions.
Mike Friedman, director of the emerging technologies practice at Mercator Advisory Group Inc. in Waltham, Mass., agreed that the Visa card is the first of its kind to use an open network. Prepaid contactless cards have been around since 1996, and more than 164 million prepaid contactless transit cards have been issued worldwide, according to a Mercator report.
Some of the earlier contactless cards were vulnerable to criminals using portable readers to steal account data, but current versions are more secure, Mr. Friedman said. The issue of contactless card data being skimmed through a wallet is “overblown,” he said.
“It’s a little bit of fear of new technology,” though “a lot of people feel this way,” he said. “It’s a very legitimate fear. If you don’t trust it, don’t use it.”
Edward Neumann, the managing director of the banking practice for CC Pace, a financial services consulting firm, in Fairfax, Va., said that contactless technology was developed to speed up transactions. Since those transactions run on the signature debit networks, it is “a boon to issuing banks if it takes off, because they make more money than with PIN debit.”
