Buzz In the Air Over Wireless Pay Systems

CHICAGO TRIBUNE – If Sony or American Express have their way, your wallet will find a permanent home in a drawer.

You will carry your driver’s license, cash, credit cards and family photos on a single card (or in your cell phone) and make purchases by tapping a few buttons or waving the card in front of a reader.

Although this vision isn’t quite ready for prime time, two basic technologies have emerged as the most promising standards for making wireless purchases an everyday reality. But a lack of interoperability between companies, and public skepticism, could hinder widespread acceptance.

Radio-frequency identification and infrared are being tested in pilot programs by credit card companies, hardwaremakers, cellular providers, banks and soft drink companies.

Sony Corp. is putting its formidable clout behind a proprietary RFID system called FeliCa, which the company says combines the words “felicity” and “card.” Sony rejected other proprietary standards, such as those utilized by Exxon Mobil Corp.’s Speedpass program.

FeliCa uses smart card technology, which allows it to read, process and store information. This gives FeliCa more flexibility than other RFID standards because it can be upgraded as the technology advances and used for such other purposes as identification cards.

And FeliCa shares the same ease of use as Speedpass, which makes it a good choice for high-traffic applications such as transportation.

This is an area in which RFID has distinguished itself. In Japanese railway stations, the Suica automated ticket system debits fares from the FeliCa contactless cards of more than 5 million passengers each day.

Sony also has partnered with DoCoMo, Japan’s largest cellular company, to integrate the FeliCa technology into handsets and jointly develop applications.

DoCoMo also is testing an infrared mobile payment system with Visa International, which also is exploring RFID. And competitor MasterCard recently announced the rollout of its own RFID-based credit card and cell phone system called PayPass, which it is standardizing with American Express’ ExpressPay.

Though this tangle of partnerships is confusing, the companies involved say researching the available technologies is one way to assure nobody gets left behind should one technology succeed over the other. It also helps to establish common standards that will be the key to more widespread acceptance.

Analysts say Sony and DoCoMo’s success–as well as the future of mobile commerce–rests on users’ willingness to trust the technology.

So far, the Japanese have been receptive to using such alternative forms of payment. And in South Korea, where 33 million out of a total population of 48 million have cell phones, thousands are using their handset’s infrared ports to make vending machine purchases.

But in the U.S., consumers are wary of paying wirelessly.

“Privacy and security have always been roadblocks,” said Creative Strategies analyst Tim Bajarin.

Speedpass popular

Bajarin said Speedpass has laid much of the groundwork in the U.S. for widespread acceptance of RFID payments.

Now Speedpass is applying the technology elsewhere. After successful pilot programs that included Chicago-area McDonald’s restaurants, Speedpass is being prepared for other fast-food restaurants and some pharmacies.

Joe Giordano, vice president of business and product development and the inventor of Speedpass, said the company is planning to upgrade the system this year to make it easier for merchants to plug Speedpass into their existing point-of-sale systems. The current proprietary system requires they have a connection to an Exxon Mobil host computer.

Giordano said Speedpass also is working on new readers that can accept multiple standards, including infrared.

The appeal of RFID technologies like Speedpass is simplicity, which is what American Express believes is the key to the technology’s success.

“The barriers have to be as low as possible for the user and the merchant,” said Tony Mitchell, an American Express spokesman. “You need something quick and easy to use, and something that doesn’t require a lot of extra expensive equipment to process.”

Alternative to Blue

American Express has been testing its own RFID-based key fob called ExpressPay, which it hopes will go over better than its Blue smart card has.

ExpressPay can be linked to any major credit card, not just American Express, and handles security by preventing fraud and placing a daily $150 spending cap on purchases.

“This limit is something we’ve found users are more comfortable with,” said Mitchell.

ExpressPay is being tested in Phoenix, where it is available at more than 300 locations and all Carl’s Jr. restaurants. The early tests showed that users spent as much as 20 percent to 30 percent more than if they had used cash or a credit card.

“The results so far have been very positive,” said Mitchell.

Still, analysts say there is still a lot of work to do. That includes overcoming the notion “that the current technology works fine for most people,” said IDC Research analyst Keith Waryas.

“I already have a mobile payment device, and it never runs out of batteries,” he said. “It’s called a credit card, and it goes everywhere with me.”

Infrared, which can be used by any cell phone with an IR port, is the better technology, according to some people.

Mike Watson, for instance, says the major problem of RFID is the need for merchants to have different readers for each company, and that consumers will need to carry multiple cards or phones to take advantage of the technology.

But “with IR you can link many different cards with the same device,” said Watson, a spokesman for South Korea’s Harex InfoTech Inc., which has developed infrared technology.

“IR devices can also accept information as well as send it, whereas RFID devices are only one way,” he said.

But Mitchell is skeptical that infrared will make the same inroads in the U.S. as in Asia.

“If you have to stop, pull out your phone and punch in a code, why not just pull out a credit card?”

– – –

Crowded airwaves pose hazard to RFID system

The great thing about wireless technology is that it can be applied to anything. The bad thing is that it is being applied to everything.

Cell phones, cordless phones, two-way radios, cordless mice, Wi- Fi Internet networks and radio-frequency identification tags are all competing for limited ranges of bandwidth allocated by the Federal Communications Commission.

Although most RFID systems, like the Exxon Mobil Speedpass, have extremely short range, even this doesn’t guarantee immunity from conflicts.

One problem with Speedpass is that it may interfere with RFID- based anti-theft systems typically used in high-end luxury cars. Auto manufacturers have been embedding RFID chips into ignition keys for years.

That coded key signals the car and allows it to start. But there’s a small chance that if the car reads the Speedpass first, it could refuse to start.

The solution: hold the Speedpass away from the ignition when starting the car. Speedpass has posted instructions on its Web site (

Wireless payment technologies

Infrared, or IR, uses the infrared port of a cell phone or personal digital assistant to beam transactions to a reader. Since the technology requires a “line of sight” transmission, the chances of having a signal intercepted are low. Some companies require a personal identification number for added security. One disadvantage is that it can take too long to use. Infrared requires users to pull out a phone, make the connection and approve a purchase.

Radio frequency identification, or RFID, chips are incorporated into key fobs like Speedpass or cell phone covers. The technology uses a low-level radio frequency that can be picked up from any direction. The technology is always on, so purchases are made by waving key fobs in front of readers at gas pumps and stores. The advantage of RFID is that it’s quick, nearly effortless and doesn’t use batteries like IR devices. The disadvantage is a lack of flexibility: Most RFID devices are designed to do one thing. They can’t receive information or be adapted when the technology changes.