New MasterCard PayPass Utilizes Contactless Card Payment Technology

Business Wire, Dec 12, 2002

Business Editors

PURCHASE, N.Y.--(BUSINESS WIRE)--Dec. 12, 2002

MasterCard International

MasterCard Partners with Chase, Citibank, MBNA and Multiple

Merchants in an Orlando, Florida Market Trial to Offer Consumers a

"Simpler Way to Pay"

MasterCard International today announced MasterCard PayPass(TM), a new "contactless" card payment program that provides consumers with a simpler way to pay.

Using MasterCard PayPass, consumers simply tap or wave their payment card on a specially equipped merchant terminal that then transmits payment details wirelessly, eliminating the need to swipe the card through a reader. The new solution is ideal for traditional cash-only environments where speed is essential, such as quick serve and casual restaurants, gas stations and movie theaters.

MasterCard is currently working with leading financial institutions - Chase, Citibank and MBNA - to trial MasterCard PayPass with numerous merchants in the Orlando, Florida area. Consumers taking part in the trial can use the card's "tap & go" feature at participating Orlando merchants, including Boaters' World, Chevron, City of Orlando Parking, Friendly's, Loews Universal Cineplex, Ritz Camera and Wolf Camera. Quick serve restaurants and additional retailers will be added in January. Since the MasterCard PayPass card can be used exactly like existing magnetic stripe cards in addition to the new PayPass feature, consumers can also use it at any of MasterCard's more than 29 million acceptance locations around the world.

"The introduction of MasterCard PayPass is a prime example of MasterCard's commitment to providing our customers, and their cardholders, with a variety of innovative and secure options to meet their evolving payment needs," said Art Kranzley, chief e-Business officer, MasterCard International. "MasterCard PayPass transactions are simpler and faster than cash, and leverage the high-level security of payment cards, that consumers have come to trust."

The MasterCard PayPass Value Proposition

The strength and appeal of MasterCard PayPass benefits all parties involved in the payments process - cardholders, merchants and financial institutions.

MasterCard recently completed extensive consumer research that indicated 63 percent of consumers surveyed said that they would "definitely" or "probably" use MasterCard PayPass if their bank offered it to them. Also, consumers surveyed who would "definitely" use MasterCard PayPass indicated that it would replace cash in more than half (53 percent) of their future transactions. Consumers' feedback indicated that PayPass is perceived to be "innovative" and "fun to use," as well as an enhancement that "would make shopping less of a hassle."

Among the benefits to consumers, MasterCard PayPass is designed to:

- Provide better record keeping than cash

- Provide a quick, easy payment method, thereby improving the overall in-store experience

- Increase the feeling of security, as cardholders remain in control of the card during transactions

For merchants, MasterCard PayPass is designed to:

- Be simpler and faster than cash, thereby speeding consumers

through the check-out process

- Increase average transaction amounts spent as compared to cash

- Provide a reliable, trusted payment method that works well in

"quick pay" environments

- Help attract new customers and increase their loyalty

For member financial institutions, MasterCard PayPass is designed to:

- Increase Gross Dollar Volume (GDV) by attracting payments away

from cash

- Open up new acceptance opportunities for "quick pay"

environments

- Increase accountholder loyalty for their card programs

How MasterCard PayPass Works

MasterCard PayPass is an enhanced payment card that features a hidden embedded computer chip and antennae. A cardholder simply taps or waves his or her MasterCard PayPass card on a specially equipped merchant terminal. The card then transmits payment details wirelessly, eliminating the need for a cardholder to hand over his or her card for a merchant to swipe through a reader. Account details are communicated directly to the special terminals and are then processed through MasterCard's highly trusted acceptance network. Moments after a consumer taps the terminal with his or her PayPass card, they receive payment confirmation and are on their way.

MasterCard PayPass is built around globally interoperable standards and relies on the ISO Telecommunications Standard #14443 to transmit Track 2 data via radio frequency. In North America, where the majority of transactions are authorized on-line, the payment application data is based on the magnetic stripe information. The card/terminal interaction is based the MasterCard Proximity Chip - Online Profile, which is a subset of EMV/ISO7816 commands.

Bringing MasterCard PayPass to Market

The MasterCard PayPass trial program is designed to test the real-world applications of a contactless payment card. This test builds upon the successful employee pilot that recently took place at MasterCard's Purchase, New York headquarters. Initial results from the employee pilot showed that purchase transaction time was reduced by up to 64 percent. In addition, the average transaction amount increased by 10 percent when using a payment card in lieu of cash.