Will that be cash, fingerprint or cell phone?

By Kevin Maney, USA TODAY

"Credit cards are just a physical variant of identity, so any way you can identify someone can be a way to pay for things."
— John Gage, Sun Microsystems

Imagine throwing away your wallet.

No need to carry credit cards or cash. No need to haul around cards for the ATM, video store, gas station or frequent-flier program.

It would all be replaced by just your fingerprint. Or perhaps your cell phone. Or a round piece of plastic the size of a quarter.

It would be the most fundamental change in personal finance since the introduction of the credit card in 1950. And it's not science fiction. Visa and MasterCard are aggressively testing devices and services that head in that direction. So are Sony, Philips, IBM, Sun Microsystems and scads of other technology companies, including start-ups such as Pay By Touch, which is gaining momentum for the fingerprint solution.

"We want to get people to think of payment apart from a piece of plastic card," says Tolan Steele, vice president at Visa USA. For the first time, credit card issuers want to separate credit from cards.

Adds John Gage, chief scientist for Sun, "Credit cards are just a physical variant of identity, so any way you can identify someone can be a way to pay for things."

Consumers in test markets around the world are already signing up to use some of these technologies. Within a year, the technologies that emerge as winners will be offered more widely. Within five years, they're expected to have a major effect on the way people use and think about money.

That will reverberate through society and business. A fingerprint system could let a mother and teenage daughter share a credit card account, but the system would know by the fingerprint which person is using it. That way, the daughter couldn't charge a case of beer, and the mom could set spending limits.

When traveling, a cell phone-based system could let you store your itinerary, boarding passes and identification inside your phone, changing the way passengers check in for flights and go through security.

And one goal is to get people to use these new technologies for the kinds of small purchases that usually require cash. That has a boatload of implications, from perhaps helping lines at Starbucks move faster to helping tax collectors trace transactions.

Chips, fingers identify you

The new ways of paying fall into three basic categories: radio frequency identification tags (RFID), gadgets and biometrics.

Credit card companies, banks and retailers say no single version has the edge right now — and consumers might even wind up with some combination of the technologies. A look at each:

• RFID. In 1997, Mobil introduced the granddaddy of credit card alternatives: the Speedpass. It's been a minor hit, now available at 7,500 Exxon and Mobil stations (the two oil giants have since merged) and 440 McDonald's near Chicago. In December, Timex unveiled a Speedpass-enabled watch.

Typically, a Speedpass is a piece of plastic encasing a computer chip and a tiny radio antenna. The chip contains a code to identify its user; the antenna can communicate with a receiver built into a gas pump or a reader set up next to a cash register.

To make a purchase, a consumer can wave a Speedpass near the gas pump or reader. The receiver picks up the consumer's identity and sends a signal back to a central computer, which verifies the ID and matches it to a credit card account. Within seconds, the purchase gets approved and charged to the user's account.

That's the underlying idea behind most RFID payment systems. While Speedpass data go to ExxonMobil's computers, an RFID chip could send its signal to a credit card company such as Visa or American Express, or to a bank for a debit card transaction. It could just as easily access a so-called stored value account — you put money into a special account for purchases at a particular store, like a college bookstore.

In Orlando, MasterCard is actively testing an RFID system it calls PayPass. Interestingly, the RFID chip is embedded in what looks like any other MasterCard. The only difference: Instead of swiping the card through a reader and signing a receipt, you wave it near a receiver, and you're done. No signature required.

As PayPass evolves, it could take on other forms, says Art Kranzley, senior vice president at MasterCard. "We're certainly looking at designs like key fobs. It could be in a pen or a pair of earrings. Ultimately, it could be embedded in anything — someday, maybe even under the skin."

Visa and Philips have been working on a similar technology called Mifare, though that's mostly been tested overseas.

Dallas Semiconductor has developed a coin-size RFID device it calls iButton. It's being used for mass transit in Istanbul. Residents deposit money in an account, wave the iButton as they go into a bus or subway, and the amount is taken out of that account.

Still, experts note that one big hurdle remains for RFID systems: security. Lose your RFID-enabled card or earring, and someone else could easily use it to run up charges — especially if no signature is required. One possible solution is to pair RFID with some other quick method of identification, such as a voice print or retinal scan.

• Gadgets. A cell phone has all the elements to completely replace your wallet. It has the smarts to store credit card information and an electronic driver's license. It has a keypad, so you could punch in a PIN to verify a purchase. Newer models even have a screen, so you can carry photos of your kids.

With the screen, "We can also brand cards in the phone," says Sue Gordon-Lathrop, whose title at Visa is vice president of emerging consumer environments. The Visa symbol or the image from an affinity card (maybe your alma mater or favorite football team) could pop up. "It would be more analogous to pulling a Visa card out of your wallet," Gordon-Lathrop says.

To make a cell phone easy to use for payments, it will have to be armed with an infrared port, an RFID chip, Bluetooth or some other kind of short-range wireless connector, companies involved say. Consumers will want to quickly beam their credit card info to a reader, not dial in and use up airtime minutes.

SK Telecom in South Korea is mounting the biggest test of this kind of system. Nokia is trying it on 300 phones in Lahti, Finland. In October, Sony and NTT DoCoMo said they would team to make phones that can be used to pay for purchases.

• Biometrics. Among the most beguiling concepts is to replace all your cards with something you can't misplace or forget: your fingertip. Among companies working on that is Pay By Touch, run by a former IBM, Oracle and Siebel Systems executive, Craig Ramsey.

To begin using the system, you'd walk up to a device — perhaps in a grocery store or 7-Eleven — that has a keypad, a card swipe and a postage stamp-size pad for reading fingerprints.

Put your finger on the pad five times so it can get an accurate reading — the system doesn't store the full image of your print, just a handful of points that correspond to a mathematical formula and can't otherwise be decoded. That way, your fingerprint can't be stolen.

Once the system has your print, you swipe in any cards — credit, ATM, etc. — you want to add to your finger-based wallet and punch in a seven-digit PIN. All that information gets stored in Pay By Touch's computers.

From then on, when you want to make a purchase at any store that has Pay By Touch's system, you place your finger on the pad, punch in your PIN, scroll through a menu on the screen of your different cards, pick one and you're done.

In the background, Pay By Touch bounces the info about the purchase to the appropriate card issuer, which verifies the payment and adds the amount to your bill.

"This thing will either crash and burn in six months, or it will be huge," Ramsey says. "We think it will affect consumer financial relationships more than ATMs."

Pay By Touch was just launched this year and is being tried in a test in Texas.

Other companies, such as BioPay, are also working on fingerprint payment systems. The big credit card companies have done limited tests on fingerprint systems.

Their attitudes about fingerprints seem to be shifting. In March, Visa's Gordon-Lathrop said the company "didn't see much of an upswell on that" but this month indicated that Visa is looking at it again.

In the end, the winners might be a mix of the technologies. Ramsey talks of putting fingerprint readers on cell phones with Internet access, so Pay By Touch can allow consumers to shop remotely and pay with their fingers.

MasterCard is looking at fingerprint readers on smart credit cards — "so you can validate the fingerprint right in the card," Kranzley says.

Driven to find a solution

Why bother with any of this? Credit cards have been good enough for more than 50 years.

In fact, the new technologies promise benefits for every piece of the credit card puzzle.

For issuers of credit cards, the new systems are expected to ultimately be far more secure, making it harder to steal information. That could save issuers billions of dollars a year that now are lost to fraud.

For retailers, the new systems can speed up transactions. Stores such as Gap or Starbucks would have more success issuing their own credit or stored value cards — consumers often don't sign up for such cards because they don't want more cards in their wallets.

But if a Gap card were virtual — through a fingertip or cell phone — an extra card would be just another item on an electronic menu.

And consumers would likely get new ways to make purchases that are faster, easier to carry, more secure and more flexible.

Forces are lining up to push electronic wallets into the mainstream. "The whole idea of money is about to be expanded," Sun's Gage says.

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