Contactless Stickers for Cell Phones Move onto Payments Networks

First Data Corp. announced on Tuesday it will use technology from Inside Contactless, a French chipmaker, for its Go-Tag product, a sticker that can be affixed to mobile phones to make them work like contactless-payment devices. Under the three-year agreement, Inside Contactless will supply so-called prelams, or chip-and-antenna elements, that card manufacturers can use to manufacture the stickers for First Data. Up to now, Go-Tags have been proprietary devices for use in so-called closed-loop networks involving individual merchants, but with Inside Contactless's technology the product will likely be usable by mid-year on the payWave and PayPass contactless platforms operated by Visa Inc. and MasterCard Inc., pending certification on those systems, according to industry sources. A First Data spokesperson will not comment beyond Tuesday's announcement concerning the company's arrangement with Inside Contactless to provide prelams for Go-Tags. In addition, CPI Card Group, a card manufacturer based in Littleton, Colo., last fall said it expected to ship millions of contactless stickers based on prelams from Inside Contactless (Digital Transactions News, Oct. 15, 2008). CPI's customers are financial institutions interested in using the stickers to permit contactless transactions on payWave and PayPass. CPI is a manufacturer of Go-Tags, but will not comment on any plans for that product. First Data's deal with Inside Contactless follows by one day an announcement by Blaze Mobile Inc., an Alameda, Calif.-based provider of applications for mobile devices, that it is introducing a similar sticker that will work on the PayPass platform. The product works with the Blaze Mobile Wallet, a service the 4-year-old company launched a year ago when it was known as Mobile Candy Dish Inc. (Digital Transactions News, April 10, 2008). The stickers link to prepaid accounts managed by MetaBank, a Storm Lake, Iowa-based unit of Meta Financial Group Inc. Developments such as these represent what payments experts call a “bridge” to full-fledged mobile payments based on near-field communication (NFC), a technology that works with the operating system of a mobile phone to establish a very short-range, two-way link with other NFC-enabled devices. Such phones can link with contactless readers to allow tap-and-go payments, for example. But NFC development has bogged down in squabbles between mobile carriers and financial institutions over transaction revenues and other issues, and very few handsets equipped with NFC chips have been introduced. Unlike embedded NFC chips, contactless stickers work like contactless cards, which means they don't interact with the intelligence built into a mobile device. But they do permit the phone to be used as a payment device and get consumers used to the idea of waving or tapping a handset to make a payment at a point of sale. “It's pushing for that pattern of behavior,” says Nick Holland, a senior analyst at Aite Group LLC, a Boston-based payments consultancy. “It telegraphs that NFC has become the standard for wireless mobile payment.” Adds a spokesperson for MasterCard, referring to the Blaze Mobile sticker: “This is a solution that gets consumers comfortable paying by phone.” The announcements by First Data and Blaze Mobile, however, push contactless stickers beyond proprietary applications, where they have mostly been used, onto the networks operated by the world's largest payments networks. By working with the PayPass platform, for example, the Blaze Mobile sticker can be used at any of the 141,000 merchant locations that are now equipped to accept PayPass cards. “It's fairly big news,” says Holland. The MasterCard spokesman refuses to reveal how many of these locations are in the U.S., but says the majority of them are. Still, contactless stickers can be costly. CPI Card Group says the cost will come down as quantity builds, but for now the product is anywhere from 2.5 to three times more expensive than a contactless card. That puts the price to the issuer at around $3 each, compared to a contactless card at $1.10 to $1.20. By contrast, conventional mag-stripe cards cost around 50 cents apiece. Much of the cost stems from the manufacturing process. CPI receives prelams from Inside Contactless but must then drop them onto standard card stock. From there, it prepunches them for personalization and removal for application to a handset. Also, Holland warns that issuers will have to convince fraud-wary consumers the stickers are safe. “Security is going to be an issue,” he says. “They will have to reassure people this is secure. This is one more form factor you can lose.”