Paying Through The Air

Visa International and Royal Philips Electronics want to help you buy stuff anywhere, any time, and through any device.

To that end the two companies Wednesday announced an alliance to promote and develop “contactless” chip technology for payment transactions.

Built on each company’s existing smartcard line, the technology is most commonly associated with identity authentication for building access. Operating on 13.56 MHz, the new near field radio-frequency communication technology (NFC) technology would allow the transfer of any kind of data between devices such as mobile phones, digital cameras and PDA’s as well as to PC’s, laptops, game consoles or PC Peripherals, across a distance of up to twenty centimeters.

Among the potential consumer applications cited by Philips and Foster City, Calif.-based Visa are gaming, ticketing, mass transit, and home shopping.

“You could start seeing some of these on the market within eighteen months,” said Gaylon Howe, executive vice president of Visa, consumer product platforms. “I think digital content, music and games will be some of the first.”

“For example,” Howe said, “you could download a song on your MP3 player, using your chip card to pay for the rights. Then you could use your card to get and play the same song on someone else’s player.”

Technology that allows you to tap an MP3 player with a card and automatically download music already exists said Howe. “What is lacking is the proliferation,” he said.

Philips, based in Amsterdam, is already a leading manufacturer of smart card [credit card sized cards with embedded microchips] technology for the European market.

It is technology that has been slow to catch on in the U.S. Aaron McPherson, analyst with financial insights, a division of IDC in Framingham, Mass., said the new alliance may be aimed at cracking the domestic market.

“One reason smart cards have not found widespread adoption in the U.S.,” explained McPherson, “is that they require special readers and merchants have been reluctant to make that investment. But if you integrate contactless chips into these cards there may be a more compelling case for adoption.”

Similar to a partnership between Philips and Sony, the two companies are looking beyond smart cards to cell phones, PCs, and other devices. “Smart cards are certainly the foundation for us here at Visa,” said Howe, but we think this technology will start to show up in mobile phones, game stations, MP3 players and TVs.”

“That is the other promising aspect of these deals,” said McPherson. “If you can integrate a contactless chip into a device people are already carrying, such as a cell phone, there is better chance of adoption.”

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