Nokia, MasterCard Test M-Commerce in Dallas

Some Dallas area residents will soon be buying bagels and cameras with their cell phones.

MasterCard, and Nokia Tuesday said they are testing the latest addition to MasterCard’s PayPass platform.

The program, which debuted in another trial in Orlando late last year uses as system that company officials are calling a “contactless” payment at the point of sale.

“The technology consists of a contactless chip and radio frequency antenna,” explained Beth Horowitz, senior vice
president, product services, at MasterCard International.

Horowitz said the chip has been specially programmed with pre-registered MasterCard payment account information. When consumers tap or wave their Nokia phones on the specially equipped PayPass readers at the point of sale, payment account information is transmitted to the terminal. The transaction is then processed through MasterCard’s payment network in the normal way. A system provided by JPMorgan Chase processes the payment account information.

“In Orlando these are embedded in a card. In the Dallas trial the same technology is embedded in the cover of the Nokia cell phone,” she said.

The new trial is slated to launch later this month. Participating retailers include Rockfish Seafood Grill, Corner Bakery Cafe, Jason’s Deli, Wolf Camera, and Chevron . MasterCard said companies participating in the trial and subsequent rollout would all need to install a special reader to receive the radio signal.

“We started doing a lot of research on smart cards a few years ago,” said Horowitz, referring to cards with embedded chips that are widely used in Europe. “PayPass grew out of what we learned there.”

Horowitz said the primary lesson was that the American market is fundamentally different.

“We found pockets of opportunity in the ‘quick pay’ market,” she explained. “And consumers like different form factors, which is why we are now testing PayPass on cell phones.” Horowitz said watches are another “form factor” possibility.

Even before the Dallas tests, contactless, fast pay systems are the new types of m-commerce that are already catching on at the gas pump.

“PayPass is an attempt to capitalize on the success of Speedpass.” Said Aaron McPherson, analyst with IDC in Framingham, Mass. Speedpass is an Exxon-Mobile program that allows customers to pay by waving a wand at the point of sale. The wand also has an embedded chip with an antenna.

But, McPherson was skeptical about PayPass for a couple of reasons. “I don’t think it adds much to the standard method of swiping your credit card. And the merchant is required to purchase special hardware, something they are typically reluctant to do.”

MasterCard hopes merchants will be attracted to a new marketing channel. The Paypass trial in Dallas also includes a mobile commerce messaging platform. Retailers will be able to send advertisements straight to your cell phone. These will be packaged in SMS (Short Messaging Service) and, later, MMS (Multimedia Messaging Service).

McPherson questioned whether or not consumers will want to turn their phones into ad channels. Horowitz thinks some will. “Customers will have to opt in to this,” she said, “but our research indicates many will. This is one of the things we will be testing. That’s why you do trials.”