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.

The NFC-like functionality of the stickers comes without having to rely on mobile operators, which generally want banks to put their payment applications on SIM cards that the telcos issue, notes Jacek Kowalski, Inside Contactless co-founder and former CEO who now heads Twinlinx, of France. The startup also is working on an NFC-Bluetooth sticker said to be drawing interest from some financial institutions and transit operators.

A Battery Of Issues
But suppliers of the more-sophisticated stickers have faced a range of technical challenges that they have not fully resolved. Among them is how to deal with the battery their stickers require to power the Bluetooth chips. That makes the stickers thicker and could create problems for recharging.

Besides the battery, the first version of TranZfinity's sticker includes a reader for a miniature smart card designed to store the applications. The sticker also has a USB port to connect to a PC. All this makes for a bulky product at 7 millimeters thick. That is nearly 10 times thicker than a standard credit card.

A second version of the sticker, due out later this year, would cut the thickness in half, says Canterbury. But that is still too thick, say critics.

Bluetooth stickers also require small applications, or "midlets," to run on the handsets they are attached to, requiring vendors to keep track of the range of phone operating systems and software interfaces on various phone models.

And as with the low-tech, passive stickers, suppliers of the Bluetooth versions have to make sure they shield the contactless antennas in the stickers from the metal in the phones, which can distort the radio waves transmitting the transaction data between the sticker and reader. The shielding adds thickness to the sticker, however.

Moreover, stickers are significantly smaller than cards, meaning the antennas also are much smaller. This reduces the range at which the stickers can send data. The first Go-Tags will communicate at up to 2 centimeters, not up to 4 centimeters as Visa and MasterCard require for contactless cards. The card schemes are being flexible in their certification requirements, say suppliers.

Perhaps the biggest concern for issuers is price. Stickers cost substantially more than contactless cards–perhaps three times more for passive stickers, according to one report last year. Add Bluetooth and a direct connection to the phone and network, and stickers start at 20 euros (US$28) apiece, according to Kowalski. He hopes to get the price down to 10 euros apiece by 2011 and as low as 5 euros in 2012.

That would be a tall order, and he acknowledges he would have to sell 1.5 million of the company's My Max stickers by 2011 to realize price decreases. TranZfinity's Canterbury declined to talk about prices.

Other Alternatives
One alternative to the Bluetooth-NFC sticker is a wireless-Internet "flip reader" from U.S.-based Narian Technologies.

Retailers, restaurateurs and other service providers would install the small devices at strategic points in their establishments. Consumers with passive stickers on their phones would tap the readers, which would be equipped to connect to the Internet wirelessly. The consumer could, for example, order food or page a waiter while seated at their dining tables using applications on their phones. The readers and the mobile network would handle the communication with back-end servers.

Promoters of the passive Go-Tag or Blaze Mobile stickers say they also could communicate with consumers on their phones, but indirectly. For example, after a consumer taps his sticker for a purchase, a bank could send back a purchase receipt or other transaction record through the payment network and then on through the consumer's mobile network.

But stickers, especially the low-tech versions, are not made for communicating with consumers, just for tapping to pay. And they will get consumers used to tapping their phones while mobile-payment promoters wait for NFC.

 "It's not the full NFC experience or integrated with the phone," says Simon Pugh, group head for MasterCard's global center of excellence for mobile. "(But) it is available now."  CP

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