This story appears in the June/July 2009 issue of Cards&Payments (updated 5/27, 6/2).
U.S. bankcard processor First Data Corp. believes its Go-Tag contactless sticker would make the perfect mobile-phone accessory for the harried consumer wanting to save time at the checkout counter. Consumers could attach the low-tech stickers to the backs of their phones, iPods or other devices and tap them to pay, just as they would with contactless cards.
But unlike with cards, sticker-using consumers likely would be more aware they are carrying a contactless-payment device, so they might use the application more often. And big merchants could brand the stickers and perhaps also offer loyalty applications on the same chip embedded in the sticker, giving them more incentive to accept contactless payment, First Data contends.
Despite a false start last year rolling out closed-loop stickers, First Data is predicting major deployments this year with its prepaid Go-Tag that likely will carry Visa Inc.'s payWave contactless application. The processor has signed an exclusive three-year deal with France-based contactless-chip supplier Inside Contactless SA, and sources say the deal includes significant commitments for orders.
"You'll see a number of announcements shortly from many merchants and others that plan to put many thousands of retail locations (in place) nationally," Barry McCarthy, First Data general manager for mobile commerce and point-of-sale solutions, tells Cards&Payments.
Meanwhile, smart card supplier Oberthur Technologies SA of France announced in May it already was shipping stickers to three banks in the U.S. and Europe, including a large U.S. card issuer. The stickers support MasterCard Worldwide's PayPass contactless application.
MasterCard says more than 140,000 merchant locations accept PayPass worldwide, most in the U.S. And most of those locations stateside also accept Visa payWave and other contactless card brands.
"You have infrastructure to accept contactless (in the U.S.), and you already have banks competing on cards," says Jerome Ajdenbaum, Oberthur head of marketing and payment products. "Stickers are a good way to differentiate."
MasterCard, Visa, First Data and other industry players keen to develop proximity mobile payment had not been expecting to promote contactless stickers. Instead, they were banking on the more-timely arrival of Near Field Communication technology the past couple of years. NFC embeds contactless chips in phones, enabling consumers to tap to make payments at the point of sale while also bringing the mobile network and handset screen and keypad into play to deliver new applications, coupons and other promotions over the air.
But with significant shipments of NFC phones unlikely to hit the market until the second half of 2010, First Data and a small–but growing–number of companies, is looking to stickers as a "bridge" to NFC.
First Data has revealed little of its agreement with Visa to help roll out its Go-Tag to U.S. merchants nationally, but executives have said it is not an exclusive arrangement.
Nonetheless, after news of their deal, MasterCard apparently dusted off its partnership with U.S.-based mobile-wallet vendor Blaze Mobile Inc. MasterCard issued an announcement in late March that prepaid stickers supporting its PayPass contactless application would be available to Blaze mobile-banking customers. Oberthur as of May was keeping the names of the banks buying its stickers under wraps.
The open-loop stickers from First Data, Oberthur and Blaze work on any contactless terminal that accepts payWave or PayPass. The companies will join a few other closed- and open-loop contactless payment-sticker programs already under way or planned in the U.S., Europe and elsewhere (see chart).
Marketing Help
Sticker promoters hope the concept can reinvigorate contactless payment in the U.S., home of the largest rollout of contactless open-loop card payment worldwide.
Before the financial crisis hit, banks and merchants were making slow if not steady progress deploying cards and terminals and in trying to build awareness among consumers and store clerks. But this year, Inside Contactless, which owns the lion's share of the U.S. contactless-chip business, projects shipments from all card vendors will flatten at about 65 million units, thanks in large part to the economy.
Merchant locations accepting contactless payment in the U.S. always have lagged card issuance in terms of market penetration. So First Data's foray into contactless payment has raised hopes that the processor can recruit more big merchants to accept and distribute contactless. Among other benefits, merchants would brand the stickers, as they do their prepaid cards.
"They've got breadth and the market (share) to distribute and process and personalize (stickers)," Charles Walton, Inside Contactless executive vice president of payments, says of the vendor's sticker rollout partner. "They've got the ability to drive terminals out, too."
First Data had predicted a Go-Tag sticker rollout by the end of 2008, starting mainly with closed-loop gift stickers. DVD-rental chain Blockbuster Inc. was mentioned as the first big retailer to issue and accept the stickers, but the chain has yet to introduce the Go-Tag. McCarthy declined to say what happened, but the chain's mounting losses may have something to do with it. The chain posted a loss of nearly $375 million in 2008 and had to refinance loans from its creditors.
McCarthy also declined to name merchants planning to launch either closed-loop versions of the Go-Tag or the higher-profile open-loop prepaid stickers. But he characterizes the rollouts as imminent and says they likely would progress from prepaid open- or closed-loop stickers issued by merchants to debit and credit stickers issued by banks. And, unlike NFC, the new service does not have to gain the support of companies up and down the mobile value-chain, he notes.
"Go-Tag is not dependent upon a carrier or handset manufacturer to work," McCarthy says. "Go-Tag can turn any handset into a mobile-payment vehicle."
But suppliers of competing products to the "passive" Go-Tag sticker contend that if the Go-Tag and its ilk represent a bridge to NFC, that bridge is a weak one. The card has no direct contact with the phone or mobile network.
'Not Mobile Payment'
"It's not mobile payment; it's a (card) sticker that is stuck to the back of the phone," says Robert Canterbury, chief marketing officer for TranZfinity Inc., a U.S.-based startup planning to deliver and manage NFC applications. "You could put it on your shoes or forehead, but it's not mobile payment."
In addition, TranZfinity, along with at least two other startups, is working to develop stickers that combine NFC chips with separate chips supporting Bluetooth, another short-range wireless technology found in most new mobile phones.
The Bluetooth chip in the sticker could communicate with its counterpart in the phone, thus opening up the handset's screen, software and the mobile network to directly support the applications in the sticker.
As with full NFC phones, Bluetooth stickers could enable users to reload value for a payment or ticketing application, view transaction records, or even download new payment or ticketing applications, all over the air. The new application would get passed from the phone to the sticker via a secure Bluetooth connection. By contrast, vendors have to preload applications on passive stickers.
And because there are NFC chips in the stickers, they also could read data from other contactless chips and not just send information, as the passive sticker does. Users, for example, could tap chips in smart posters to open up a mobile Internet connection to download digital coupons.
Canterbury, a former executive at U.S.-based point-of-sale terminal vendor VeriFone Holdings Inc., expects a financial institution to test TranZfinity's planned "Myztro" sticker for prepaid payment in conjunction with a small number of students at three to five colleges or universities this spring.