Contactless payments will be a reality across the UK within a year following an initial roll-out of the technology in London.
Mastercard is spearheading the introduction of contactless payments with the launch of its PayPass system that will enable consumers to pay for goods under £10 by holding a specially enabled debit or credit card in front of a reader.
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The cards use wireless radio frequency identification (RFID) technology to transfer payment information to the reader to enable fast payments at retail outlets. The system is geared towards retailers with high volumes of customers making low-value transactions, such as fast-food suppliers, convenience stores, and public transport offices.
The initial implementation of "tap and go" payments will involve selected cardholders who regularly use their cards in seven target areas of the capital and a mix of retailers, including McDonald's, Krispy Kreme, Coffee Republic, and Books Etc.
The roll-out will be extended across the UK in 2008. It forms part of a larger European roll-out of the technology by MasterCard and Visa Europe, which has its own PayWave contactless payment system.
The two systems build on existing chip and Pin technology. They were developed to the same international standards and EMV payment protocol, so retailers will be able to accept any contactless enabled card regardless of issuing bank or whether the card is Visa PayWave or MasterCard PayPass.
Contactless payments are being touted as a fast, convenient and secure for consumers to make low-value purchases, and for retailers to speed up service, reduce queues, and cut cash-handling costs.
UK payments association Apacs estimates that more than 5,000,000 contactless cards will be issued by the end of 2008, and that they will be accepted by at least 100,000 retailers across the UK.