Get ready for a new way to pay

By Richard Burnett
Sentinel Staff Writer

November 18, 2003

Spurred on by the results of a nine-month tryout in Orlando, MasterCard International plans to take its PayPass "contact-less" payment system into other markets across the country, the company said Monday.

New York-based MasterCard, which introduced PayPass in Orlando late last year, plans a nationwide rollout in mid-2004, company officials said.

More than 60 Central Florida retail outlets, including restaurants, drug stores and gas stations, participated in the multimillion-dollar test, MasterCard said. Certain locations of McDonald's, Eckerd, Chevron and Friendly's were among the participants.

The stores received card-scanning terminals while 16,000 local credit-card customers were given specially designed PayPass cards that could be used with the equipment. Card vendors such as Citibank, J.P. Morgan Chase, and MBNA were partners in the project.

A tiny transmitter embedded in the card let customers make their purchases by waving the card in front a scanner, rather than swiping it through an electronic reader or handing it to a store employee or restaurant server.

MasterCard concluded from the test that the PayPass system was viewed as faster and more convenient for consumers and retailers. A company's study indicated that using PayPass trims as much as 18 seconds off the time needed for the average purchase compared with cash.

Retailers told MasterCard it also had the potential to boost sales because checkout lines move more quickly, especially at fast-food drive-throughs. It found similar results in a separate marketing test in Dallas, where customers had PayPass technology installed in their Nokia cell phones.

Encouraged by the results, MasterCard expects to have an estimated 6 million PayPass customers next summer when it introduces the special card nationwide, said Art Kranzley, the company's chief e-business officer.

"We will be rolling it out in several other major U.S. markets and additional ones worldwide," he said. "That will be in addition to Orlando and Dallas, where PayPass will still be available to customers who have been using it during the test. We hope to add more customers in those markets before the rollout next summer."

MasterCard is also planning a PayPass marketing blitz, much more than the modest advertising it did during the tests, Kranzley said.

The company's main strategy is to persuade people to use their credit or debit cards more often in place of cash by making it easier and quicker to make small purchases. In doing so, it hopes to capture more market share from its chief rival, Visa, Kranzley said.

While Visa is developing similar systems, it has yet to introduce a PayPass-type technology.

"There's a lot of focus at MasterCard on leveraging technology and using its competitive advantage," Kranzley said. "We're expecting this is one technology that will help us do that."

Research indicates that MasterCard has been making inroads in recent years against Visa, the longtime market leader. In one study by Gartner Inc., MasterCard's card total surged 15 percent in 2002, while Visa's grew 1.5 percent. Still, Visa remained in the lead with more than 140 million cards in circulation to MasterCard's 114 million.

MasterCard said it is counting on PayPass to boost that total.

"Not too many people really know about it," said Allin Escobar, a manager at the McDonald's at 5400 S. Kirkman Road in southwest Orlando, which has PayPass terminals. "Mostly people just ask a lot of questions about it -- I mean, someone uses it maybe once a month. But we've had no problems. It works fine when someone does need it."

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