Chase and American Express Push Contactless Payments into Open Market

  After two years of industry testing, the U.S. contactless payments market finally has its first large-scale issuers. Chase Bank U.S.A., a division of J.P. Morgan Chase & Co., in June began offering Visa- and MasterCard-branded credit cards with contactless functionality, which Chase calls "blink." American Express Co. in June also began converting all of its contact Blue card chips to contactless.
  Contactless cards are tapped on readers at the point of sale instead of swiped. Designed to get customers through merchant lanes faster, they use radio frequencies to transmit essentially the same data that are stored on the card's magnetic stripe to the merchant's processor.
  New York-based Chase initially is offering "Chase credit cards with blink" in Atlanta and in 63 cities in Colorado where it has been working with merchants to secure broad acceptance. Chase says in Colorado alone it expects to issue more than 1 million blink cards this year.
  Scott Rau, Chase senior vice president, says the bank initially will embed the contactless chip only in credit cards and not in key fobs or other devices because customer focus groups suggested consumers would prefer to have cards with both mag-stripe and contactless functionality. Rau says Chase will have issued millions of blink cards by the end of the year.
  Chase had been working for the past two years with MasterCard International to test the MasterCard PayPass contactless functionality, but earlier this year the bank announced it would shift most of its card programs to Visa. Despite the move, industry observers do not believe the announcement is a blow to MasterCard's contactless plans.
  "Master-Card has been investing a lot in contactless and has been pitching it more aggressively than Visa," notes Gwenn B?zard, partner and research director at Aite Group, a Boston-based consultancy. "Now that an issuer is issuing contactless cards, it validates what MasterCard has been doing."
  B?zard believes Chase's decision will kick-start the contactless market in the U.S. "Once the ball starts rolling, it rolls on its own," he says. "We're not at that stage yet, but we're getting closer."
  Chase says cardholders initially will be able to use blink at movie theaters and specialty retailers such as 7-Eleven Stores Inc., quick-service restaurants and drug stores. Sheetz Inc., a family-owned and operated convenience-store chain, is Chase's first partner to launch a co-branded card with blink functionality. The bank says it plans to announce more specific merchants as it issues cards in new markets.
  Chase's launch is just the beginning, insiders say. New York-based Citigroup is expected to announce its own contactless product any day, says one source. Citigroup would not comment.
  "I believe this will bring a lot of competition coming out of the woodwork," says Nick Holland, director of emerging technology advisory services for Shrewsbury, Mass.-based Mercator Advisory Group. "I wouldn't be surprised to see an MBNA announcement soon."
  A spokesman says Wilmington, Del.-based MBNA Corp. plans to build on last year's launch of a contactless PayPass card cobranded with the Philadelphia Eagles of the National Football League. Fans can tap the card on readers at Lincoln Field, the Eagles' stadium, to pay for snacks and souvenirs.
  MBNA plans to issue similar cards for the Baltimore Ravens, New York Jets, New York Giants and Washington Redskins football teams and, before this baseball season is over, with the Philadelphia Phillies of Major League Baseball. "We are looking at ways we can leverage our affinity relationships to take advantage of sizable numbers of people in relatively small pieces of geography," the spokesperson says.
  Meanwhile, American Express in June launched a new version of its Blue credit card with a contactless chip. That will allow consumers to pay with a tap of a card at retailers signed up for the AmEx ExpressPay program, which uses the same contactless industry standard used by Visa and MasterCard.
  Blue continues to also have a mag stripe, but the new version will not carry the little-used contact smart card chip that Blue has had since its 1999 introduction, an AmEx spokesperson says. The card will retain the conventional credit card size and shape, though AmEx has been testing an ExpressPay key chain tag in Phoenix.
  AmEx will seek agreements for ExpressPay acceptance at all the merchants signing up to take similar contactless products from MasterCard and Visa, says David S. Bonalle, vice president and general manager of Advanced Payment Enterprise Development.
  7-Eleven convenience and CVS Corp. drug stores are among the merchants thus far that have said they will accept contactless Blue payments.
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