PayPass - A New Way to Pay

There would be few among us who have not walked out of a store after setting our intended purchase down simply because the line-up at the check-out was too long. MasterCard's PayPass card is a simple way for merchants to make the check-out experience quicker and more efficient. It should go without saying but a better experience for customers means increased sales for merchants.

Looking to expand its market share MasterCard realized it did not have a value story that spoke to merchants with a high transaction count but a small average ticket. Typically these merchants only accepted cash for its perceived convenience and the fact customers did not think to use their MasterCard to make a two or three dollar purchases. PayPass become the answer.

Using a MasterCard embedded with a RFID chip, cardholders simply tap the card reader and their purchase is complete. No more fumbling for exact change or trying to figure out which way to swipe a debit card. Once the MasterCard has been 'read' the transaction follows the same process as any other MasterCard transaction. Merchants with small dollar transactions like a newspaper stand or a coffee cart do not even require a signature to complete the sales. This makes contactless transactions faster than cash or faster than any other form of electronic payment.

It is not just traditional retailers who stand to benefit from this new way to accept MasterCard transactions but non-traditional retailers as well. Vending machines, the very definition of cash only merchants, will now be able to accept MasterCard by having a contactless reader added to the machine. The cost of accepting MasterCard is sure to be off-set by increased sales. A new payment method also opens the possibility of selling higher ticket items from vending machines as they do in Japan.

What's involved should a merchant wish to accept PayPass? Depending on the particular characteristics of the merchant's point-of-sale terminal a 'reader' can be directly attached to the terminal. Some devices require a stand-alone reader that connects to the terminal via one of the open terminal ports. In either instance the set-up quick and easy.

For customers looking to get a PayPass MasterCard it is almost as easy as walking into your local bank branch. Bank of Montreal, National Bank and Capital One are just a few of the financial institutions offering the card. In addition to the contactless functionality the cards also have many of the reward features now associated with using a credit card.

Contactless payments are not exclusive to MasterCard as Visa has a similar card known as PayWave. Interac is working to bring its own contactless card to market under the brand name 'Flash'. It is anticipated 'Flash' will be available beginning in early 2012.

Outside of gas stations with their pay-at-the-pump solutions adoption of contactless payments has been slow. A few reasons for the slow adoption are the fact new technology was required at the merchant level; Visa and MasterCard focused their initial efforts on large, national merchants e.g. Petro Canada; and consumer in many cases were not even aware they could use their credit card in a contactless environment. Assuming the ability for consumers to use their mobile phones to make payments is still a few years away contactless cards like PayPass should continue to change the experience at the check-out.

Given the market forces at play contactless cards are here to stay. MasterCard and Visa are looking for ways to expand market share while merchants and their customers are looking for improved efficiencies when paying for goods or services. As awareness grows both with merchants and with cardholders the use of PayPass MasterCards will become the norm and not the exception.