Following an extensive pilot program, Discover Financial Services issued its first Discover Zip contactless credit cards and stickers to select cardholders on Nov. 15, 2010. Targeted to early adopters of Discover's mobile technology, the product rollout will expand in January 2011 to include additional cardholders of the company's flagship card products.
To operate the system, consumers touch the payment device, which is a plastic card or a sticker that can be applied to a mobile phone or any personal item, to a Zip-enabled contactless reader, to make a payment. The Zip payment application integrates Inside Contactless' MicroPass 4002 chip technology with a uniquely tuned radio frequency antenna shielded to protect core units and eliminate interference from other devices. This dovetails with Discover's recently revealed plans to work with AT&T Inc., Verizon Wireless and T-Mobile USA on creating a mobile-payments network called ISIS, which will enable consumers to make payments using mobile phones equipped with near field communication technology.
"I think they're taking a very strategic view," said global payments expert Todd Ablowitz, President of Double Diamond Group LLC. "They cut a deal with carriers with the ISIS product, and it's rational that they would want to get as many of their Discover cardholders starting to use contactless and mobile technology as soon as possible. They're going to have to terminalize lots of locations with Zip for the ISIS product.
"If you're going to terminalize, you might as well get people out there using it, because the longer those terminals sit out there until ISIS cardholders are in circulation, the more chance that you have of a stale terminal, which we've seen many times over the last five years."
Discover is not new to the contactless space. Its Discover Network has worked with merchants to certify contactless readers for many years, according to company sources, and it was the first to test credit-based contactless stickers. Issuers, merchants and acquirers who lack mobile-payment technology may benefit from Discover Zip's ability to mimic mobile payments through the tap-and-pay technology the system provides.
Over 100,000 U.S. merchant locations are set up to offer certified contactless readers that accept Discover Zip transactions.
These include retailers, quick service restaurants, convenience stores, gas stations and public transit agencies. In addition, the nearly 100 bank card acquirers that sign merchants for Discover will also enable Discover Zip processing when signing merchants with competing services, such as Visa payWave and MasterCard PayPass.
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