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A Smarter, Speedier Choice
By Ian Mount

(Business 2.0) – Expensive smart cards like Target's will likely stay on the sidelines until U.S. companies experience a big problem with fraud. But another payment system--"contactless" cards that replace small cash purchases--is taking off. Instead of focusing on loyalty or discounts, these chip-embedded cards are smart for a different reason: speed.

In 1997, ExxonMobil introduced Speedpass, a key-chain fob that customers wave in front of gas pumps. The fob requires no signature, no PIN, not even the push of a button; it simply beams an account number to a reader via radio frequency. Since the launch, Exxon has distributed 6 million fobs and has found that Speedpass users make one more gas purchase a month than nonusers. The system is expanding to other vendors: McDonald's recently completed a Speedpass trial in Chicago, and 15 Boston-area Stop & Shop supermarkets accept the device.

MasterCard is running trials with a similar contactless card called PayPass that works at multiple vendors. In a 16,000-user trial in Orlando, Fla., PayPass users shaved as much as 18 seconds off drive-through purchases and increased their transaction volume by 23 percent. "If you can give merchants faster transactions, shift volume from cash to cards, and make it more convenient for buyers, all the stakeholders benefit," says Beth Horowitz, MasterCard's senior vice president for product services. MasterCard plans to deploy PayPass in other cities by year's end. -- IAN MOUNT