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Near Field Communication and all contactless technology

7-Eleven, the largest convenience store chain in the U.S., has begun selling contactless prepaid-payment stickers this year that customers can attach to their mobile phones to make payments. But sales are not brisk, say observers.

Barry McCarthy, general manager of mobile commerce and point of sale solutions at transaction processor First Data Corp., which supplies its “Go-Tag” sticker to 7-Eleven, disclosed the new contract in late October, but the launch has been given little attention by either the chain or consumers. McCarthy also said New York-based drugstore chain Duane Reade would offer the stickers by the end of 2009. They will join regional convenience store Sheetz Inc., which announced it would start selling the stickers to its customers by the end of July.

The stickers come embedded with a contactless chip storing Visa Inc.’s contactless application payWave. The chip and antenna in the stickers are similar to those embedded in contactless cards. Consumers can tap the stickers to pay wherever Visa payWave cards are accepted, which is more than 100,000 outlets in the U.S.

First Data introduced the Go-Tag last year, hoping to tap into demand among merchants and banks to enable their customers to do mobile payment without waiting for phones to hit the market supporting Near Field Communication. The big U.S. processor entered into an agreement with Visa to help it roll out the reloadable open-loop Go-Tags, which seemed to go nowhere last year among merchants as a closed-loop sticker.

Passive Communication
The payment application in the passive Go-Tag sticker cannot communicate with the electronics of the mobile phone to which it is attached. That means consumers cannot look up their transaction records on the handset screen and banks and merchants can’t send them promotions directly tied to application. That is unlike NFC phones or more sophisticated Bluetooth NFC stickers, which can communicate directly with the phones. But passive stickers are available now.

The new merchants planning to sell the stickers also accept contactless cards. 7-Eleven, in fact, was one of the first to install contactless readers in its more than 5,000 U.S. stores, starting in 2004–with the help of subsidies from MasterCard Worldwide and perhaps other card brands. Duane Reade and Sheetz were also early backers of contactless payment.

But contactless card payment, while growing slowly in the U.S., has not captured the imagination of consumers. One problem is that many cardholders don’t know their bank cards support contactless payment and don’t know where they can use the cards.

That would not be a problem for those consumers who attach the stickers to the backs of their phones or other portable devices, such as iPods. And stickers clad with a merchant’s logo would automatically tell consumers where they could tap the stickers to pay. At least, that’s First Data’s idea for the Go-Tag. Many consumers, however, might not want others to know they are using their phone as a payment device.

MasterCard Counters
MasterCard, which has aggressively marketed its PayPass contactless program, does not intend to be left out in the cold when it comes to stickers. It has certified French smart card vendor Oberthur Technologies to ship the card vendor’s “FlyBuy Sticker with MasterCard’s PayPass application onboard. Oberthur had said earlier in 2009 that at least two large banks in the U.S. were ordering open-loop stickers. But the banks have yet to announce rollouts, as has been expected. An Oberthur executive said in November that he expected U.S. financial institutions to issue stickers in 2010. Oberthur is also producing a planned sticker for Discover Financial Services.

Last March, U.S.-based Blaze Mobile announced with MasterCard availability of a sticker loaded with a prepaid MasterCard PayPass application. It’s issued by U.S.-based MetaBank. But the Blaze sticker has made little impact on the market so far.

Rollouts of the open-loop Go-Tag are also behind schedule. McCarthy last spring had promised there would be announcements by merchants “shortly” with plans to sell the sticker and representing “many thousands” of retail outlets. With 7-Eleven, First Data has a chance to make good on that prediction, if a little late.

But early indications are that the stickers aren't yet flying off the shelves, either at 7-Eleven or the other chains. Part of the problem might be that the merchants have not been promoting the stickers.

First Data has an exclusive three-year deal with France-based contactless chip vendor Inside Contactless to supply the Go-Tag stickers.