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Byline: Evan Pondel Staff Writer

First there was cash. Then there was plastic. Now there's the key fob. Credit card companies and banks say busy consumers ever in search of a faster way through a line will increasingly replace their credit and debit cards with this small device that stores easily on key chains.

The benefit of the key fobs and "contactless'' credit cards is they can be waved over a scanner for easy debiting or crediting, usually in under 13 seconds.

The current swipe system, which requires consumers to run their card through a narrow trough, or a simple cash transaction take twice as long.

Some 30 million Americans could potentially be waving good-bye to the swipe system this year and adopting a key fob or contactless credit card, up from about 9 million last year, according to David Robertson, publisher of The Nilson Report, a Carpinteria-based newsletter that tracks the credit card industry.

But some critics say the same technology that makes these contactless payment devices easier to use also makes them more of a target for thieves. Also, the new devices may not be great for consumers who have trouble controlling their debt.

"For people that are very organized and good at managing money, these are excellent tools. But for those who are trying to follow a budget it (swipeless credit cards) can be very dangerous," said Jennifer Root, a spokeswoman for ByDesign Financial Solutions, a nonprofit organization in Los Angeles that helps people manage their debt.

MasterCard, Visa and American Express all offer their own version of swipeless plastic, which take the form of credit cards, debit cards and keychains. They do that by inserting a thumbnail size chip that sends an encrypted code when the card or keychain is held within two to three inches of a scanner, usually attached to the credit card swiper.

Despite their appeal, consumers remain divided on whether the technology bodes well for their pocketbooks. Some say the ease of payment would make such products prime targets for thieves because they do not require a PIN number to use. But others welcome a technology that doesn't require repetitive swiping and signatures.

"Consumers will take to it if merchants and card issuers promote the technology sufficiently," Robertson said.

Ruth Henry, a 76-year-old retired medical receptionist from Woodland Hills, is already in the know about contactless credit cards. She thought about using a similar product called Speedpass a swipeless card offered by Exxon and Mobil gasoline stations but never followed up on the offer.

"But because these things work so quickly, I'd definitely consider it. I like the idea of a key chain credit card. That would be convenient for me," said Henry, displaying a keychain that holds her house key, car key, Ralphs card, Albertsons card and a gym membership ID.

Citibank began offering a swipeless key fob in 2005, allowing consumers to make a purchase by dangling or tapping their keys in front of a reader at the cash register.

Restaurants, drug stores and movie theaters are among the first merchants to offer swipeless payment. They include McDonald's, 7-Eleven, Ritz Camera Centers, Duane Reade, CVS, Regal Entertainment Group theatres and various stadiums throughout the country.

Asaf Buchner, associate analyst with Jupiter Research in New York, said location is key when attracting more consumers to contactless payment products. "But I'd say there is a coolness factor of contactless. And there is an attempt to get people to buy into the fact that they are more in control of their life with these products," he said.

When dealing with credit and debit cards, security is usually a priority for people who want more control. And because contactless credit cards don't always require a signature, security issues are a common concern. Most cards and keychains, including MasterCard's PayPass, come with a chip and radio antennas that help identify fraudulent use of cloned card data and random numbers generated at the sales counter.

Stephen Miles, a research scientist at Massachusetts Institute of Technology who has studied the technology, said swipeless credit cards are safer than traditional because they are virtually impossible to counterfeit.

"It's difficult (for counterfeiters) to eavesdrop on these products," said Miles, who notes the technology is far safer than a traditional credit card because the account numbers are stored on a chip.

But that doesn't alleviate Tom Dworkin's concerns. The 62-year-old businessman said anyone can pick up a contactless card or keychain and immediately begin charging.

"Even though signing for a credit card takes up time, I'd much rather do that than think about someone stealing my keychain," said Dworkin, who was a victim of identity theft about a year ago. "I'd rather see Big Brother stick around in this case and require signatures."

American Express claims that theft of contactless credit cards isn't an issue because the company will cancel payments that were not made by the cardholder. Credit card companies are also beginning to require a signature for contactless purchases of more than $25.

But the speed of a contactless transaction also poses its share of issues. According to American Express, the average ExpressPay transaction takes 12.5 seconds, compared with the 26.7 seconds and 33.7 seconds it takes for credit card and cash transactions.

Francisco Hernandez, 22, from Inglewood, said at that rate, Expresspay would save him at least a couple minutes a week. "But do I really want to make it that easy to spend money?" asked Hernandez, who works for the U.S. Postal Service. "I don't think so."


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(1 -- color) no caption (key fob)

(2 -- color) no caption (money sticking out of wallet)
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Article Details
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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Date:Apr 2, 2006

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