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RFID Payment Fobs Fail to Woo Consumers

AmEx has pulled its RFID-based key fobs off the shelf, but pundits say NFC-enabled phones hold better promise and RFID-based card usage should continue to grow.
By Mary Catherine O'Connor
Apr 04, 2008Convenience, American Express has discovered, is in the eye of the beholder. The company announced this week that it is no longer offering its RFID-based ExpressPay payment product in a key fob form factor.

Because they can be carried on a keychain, ExpressPay fobs have been marketed as an ultra-convenient alternative to the traditional credit card. But demand for the fobs—which cardholders were not automatically issued but had to request from American Express—was too low to support fob production, says American Express spokesperson Molly Faust.

Is this a sign consumer interest in RFID-based, or contactless, payment products is waning, overall? Analysts who cover the industry say no. "Fobs have a novelty value, and are convenient, but we're not seeing a strong market for fobs [over traditional card form factors]," says Jonathan Collins, principal analyst with ABI Research's RFID and Contactless Group.

Because it is both an issuer of credit cards and, like MasterCard and Visa, a credit card processor and solutions provider, American Express is unique in the payments industry; MasterCard and Visa have introduced contactless payment products, but the form factor of such products is determined by the banks that issue them.

Bank of America and Citibank have offered contactless Visa and MasterCard products in a fob form factor, but, says Collins, "mainly in trials or limited regional rollouts." Some consumers may be less comfortable with key fobs than with traditional cards, he adds, since the former do not have the cardholder's name and account information printed on them, but the low take-up rate for fobs—which is not unique to ExpressPay fobs, but is also seen among other card brands such as MasterCard PayPass—should not be viewed as a barometer for RFID payments overall.

According to ABI Research, the worldwide market for contactless technology in transportation ticketing (fare cards for subway and bus systems) and contactless payments grew more than 15 percent in 2007, as the technology made greater inroads into consumers' lives worldwide. In terms of the value of the hardware, software and services in deploying and operating contactless payments, Collins says, the market now stands at more than $200 million, but is expected to reach more than $820 million by 2013.

What seems likely to boost the popularity of contactless payments, Collins says, is the emergence of mobile phones equipped with RFID modules compliant with the Near Field Communication (NFC) specification. Such phones are designed for use as a payment device at retailers that have deployed RFID-enabled payment terminals. "There's a lot of interest in NFC among card-issuing banks," he says, "and they may see [contactless] cards as an interim step to NFC phones, because NFC phones will bring additional benefits [to banks]."

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