BY JOHN FRANK CONTRIBUTING EDITOR
Visa International’s decision to endorse a global payment specification for contactless cards based on the ISO 14443 specification may have far reaching implications. The decision likely will lead other payment organizations to consider doing the same and so could spur the evolution of multipurpose contactless cards.
But experts and Visa officials agree such development will begin in Asia and then spread to the United States. “Asia/Pacific is the absolute hotbed for technology,” says Sue Gordon- Lathrop, Visa’s Vice President, Emerging Consumer Environments.
Asia’s lack of existing payment infrastructure makes it a ripe market for new technologies such as contactless cards.
“Certainly I think this is something that is driven from overseas,” agrees Ed Kountz, Senior Analyst in the TowerGroup Emerging Technology Solutions Practice. Visa’s decision “certainly has moved contactless from a niche part of the world,” he says.
Visa for the past two years has been looking at four contactless technologies– transponders similar to those used by ExxonMobil for its Speedpass; infrared technology; Blue Tooth; and the ISO 14443 standard technologies, explains Gordon-Lathrop.
Visa has a number of trials underway or planned in Asia working with telecoms and infrared technology. One with SK Telecom in Korea, began in December. Banks there are issuing cards with pop-out Visa chips that can be put into SK phones and be used at any merchant with terminals that accept infrared technology. Visa can supply a device called a dongle that attaches to a terminal serial port and allows it to accept infrared transmissions. It’s planning similar infrared trials with the South Korean company LG as well as KDDI and NTT DoCoMo in Japan.
But the problem with infrared technology is that it cannot fit on a card. So Visa turned to specifications based on ISO 14443 because it both fits on a card and can be incorporated into mobile phones–meaning multipurpose projects could be undertaken with telecom companies around the globe. The Visa specification is designed to support both the Type A and Type B versions of the ISO 14443 standard.
Visa released version 1.0 of its new specs for contactless debit/credit cards in August of 2002. Banks have shied away from contactless technology in the past because of concerns for the security of data being transmitted, but Visa determined that “in a case like this there was more perceived threat than real threat,” says Gordon-Lathrop.
The card market is being driven today by such industries as the oil companies looking for faster ways for customers to pay for purchases, by transit systems also trying to move people more quickly through their turnstiles, and by telecoms looking for other functions they can piggyback on their phones. Contactless technology makes sense in those industries because of its speed and ease of use for consumers.
And multipurpose cards make sense because they spread the cost of infrastructure among a variety of service providers. “We at Visa Central are very much supportive of multiapplication cards,” says Gordon-Lathrop.
Analyst Kountz sees Visa’s decision in global terms. “From my perspective, I don’t think it would have happened had there not been some bigger trends in play,” he says. Credit card issuers have yet to find the longsought- after “killer app” that will fuel an explosion of consumer demand for smart cards.
But in other areas, such as mass transit, use of cards is expanding rapidly, particularly in places like Hong Kong and Japan, Kountz notes. “It really is being driven by convenience,” he explains. Even in the U.S., transit systems are switching from mag stripe to contactless cards to speed customer throughput.
The variety of standards and technologies has slowed the growth of contactless cards, Kountz points out. No one wants to be caught using technology that suddenly becomes obsolete. “Multiple potential standards need to coalesce. It makes no sense for merchants to support multiple terminals and users of different card.”
Visa’s decision to back ISO 14443, “puts RFID moving forward to become the standard for these types of payments,” Kountz contends. “The selection of 14443 is significant.”
Visa’s timetable for its new standard is to continue launching pilot projects in the Asia/Pacific region in 2003 and 2004. Some pilot projects will be sizable, with cards being issued in the millions. Full-scale rollouts shouldn’t be expected before 2005, Gordon- Lathrop says.