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Credit cards: a contactless future

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The contactless credit cards currently being trialed in the US offer numerous advantages such as speed and security. Despite this, a lack of common standards for the new RFID cards and the current roll out of chip cards under EMV standards means that it will take some years before they become mainstream.

The contactless cards that American Express and MasterCard have been trialing differ from traditional magnetic strip cards as they have chips imbued with radio-frequency identification, or RFID. The new cards only have to be held near a special reader in order to function and cardholders don't have to remove the card from their wallets. The main advantages of such a system are speed and security.

Both the American Express and MasterCard trials have met with some success. American Express' Express Pay has been trialed on numerous occasions in Phoenix, and has recently been expanded to the New York Ferry terminals for the Hudson River, while MasterCard's PayPass is set to be rolled out across the US in 2004, initially focusing on fast food outlets and other similar places where people are in a hurry.

Despite the success of these pilots and the advantages that contactless cards offer, it is unlikely that they will become mainstream in the near future. One major reason is the lack of common standards in place; at present the card schemes are using their own technology. If contactless cards are ever to become a mass payment system, the card schemes need to work together to create common standards.

Contactless cards will also initially struggle because much of the card world (the US aside) is focusing on the transfer to chip cards under EMV standards. In Europe and some other countries the transfer process is already underway. Indeed, much of Europe aims to have EMV fully in place by 2005, although this deadline is likely to be difficult to meet.

Ultimately the point remains that with card issuers, schemes and retailers in much of the world focusing on EMV standardized chip cards, there is little room for the development of contactless credit cards at the present time. Contactless credit cards may be the future for the payment card industry, but it appears that they are for the longer-term future.

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