Is contactless payment approaching an inflection point?

12/2/2009 9:39 PM EST

I recently saw a summary of a market-research report predicting a somewhat optimistic future for contactless payment, a form of RFID where the credit card has an embedded chip which communicates with the reader over a short distance. (I commented about this several months ago, and you can also see two recent IC press releases for this market, in the links below.)

The press release for "The World Market for EFT-POS Terminals and Contactless Readers" from IMS Research (Wellingborough, UK) indicates that despite the retail and general economic slowdown, more banks and other credit card issuers are shipping contactless cards, and reader manufacturers are also seeing modest growth in demand. (In case you did not know: EFT is electronic funds transfer, while POS means point of sale.) The press release also includes the customary crystal-ball graph showing the annual market in dollars, not units, for both contactless and conventional readers out to 2013; frankly, I have absolutely no faith in such long-term projections, so I will ignore them completely.

Where do you think these contactless cards are going? I still have my doubts, for three main reasons.:

• First, the card itself is more expensive than a conventional magnetic stripe card, and that adds up over the millions of cards shipped.
• Second, more establishments now have the card owner personally "swipe" the card through the reader, so the card never leaves your possession, which is a nice feature (I do bristle at how the word "swipe", which used to mean "to steal", now means pulling a card though a reader!).
• And finally, I just don't see the benefits of contactless card reading versus a regular card with its magnetic strip.

I know that our industry is always searching for "the next big thing", a market or niche that will bring growth of 10-20% per year, and maybe this is it. Then again, "contactless" may be sexier, and it may be a handy when you are using it as in ID card to access an area, but for payment at the store's checkout, I just don't get it, sorry. ♦