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MasterCard Making Proximity Payments Priceless

The buzz began several years ago with a 2003 pilot program in Orlando involving three participating card issuers and more than 60 merchants. In 2004 MasterCard began signing up major national merchants. Last month, it launched an aggressive television advertising campaign for PayPass, its proximity, or contactless, payment solution. It seems that contactless payments have finally arrived.

"More than 2 million PayPass cards are already in the marketplace," T.J. Sharkey, MasterCard's Vice President of Business Development U.S. Acceptance Group, told attendees at the recent Western States Acquirers' Association meeting (see "Wireless Wins at WSAA Conference" in this issue). "By the end of the year MasterCard expects to have 7 million PayPass-enabled cards ... and 25,000 merchants accepting them."

Currently its greatest market presence is with QSR and pharmacy merchants east of the Mississippi, but the program is also expanding to the Western states. Sharkey said MasterCard expects to have 20 million U.S. PayPass cards in the market by the end of 2006.

For example, McDonald's, 7-Eleven stores, CVS, Ritz Camera Centers, Boater's World Marine Centers, Sheetz, Regal Entertainment Group theatres (Regal Cinemas, United Artists Theatres and Edwards Theatres), Duane Reade and Meijer Stores are all participating in the program.

PayPass is also accepted at FedExField, QWEST Field, M&T Bank Stadium, Lincoln Financial Field and Giants Stadium, homes of the National Football League's Washington Redskins, Seattle Seahawks, Baltimore Ravens, Philadelphia Eagles and NY Giants, respectively. And the list is growing. The three card issuers that participated in the Orlando pilot, JPMorgan Chase & Co., Citigroup and MBNA Corp. (now owned by Bank of America Corp.), have all gone on to issue the PayPass cards. MBNA began issuing cards in Atlanta, Citibank is launching its cards in New York and Chase began in Philadelphia (Chase has branded its program "blink" for both Visa and MasterCard-branded cards.)

Sharkey said these banks are among the top 10 card issuers in the United States issuing PayPass-enabled cards. HSBC bank, for instance, is issuing debit cards for the program.

MasterCard's research indicates that merchants like the solution because it's easy to implement, speeds up the check out, and builds customer loyalty.

Consumers also find it easy to use and understand. "Eighty-six percent of consumers want to use cash less often," he said, citing MasterCard research. Consumers most likely to use PayPass are those who are time stressed, who think of themselves as trendy and who have a spontaneous outlook on life. Many Americans must perceive themselves in this way because the first day after the PayPass commercial aired, received more than 250,000 hits.

MasterCard PayPass uses radio frequency technology to transmit payment information wirelessly between a PayPass device and a merchant's terminal. The transaction is then processed through MasterCard's network for clearing and settlement. A number of terminal manufacturers including Hypercom Corp., OTI, VeriFone and ViVOtech supply the equipment.

In other news, MasterCard teamed up with USA Technologies to bring PayPass to vending machines. More than 500 vending machines in New York City and Atlanta will be equipped to accept PayPass.

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