MasterCard cash replacement makes Aussie debut

MasterCard Worldwide is joining with the Commonwealth Bank -- and playing on Australians' love of their mobile phones -- to launch its PayPass cashless payment system down under.

PayPass offers prepaid, credit or debit capabilities, which allow payments to be made without swiping cards or entering PINs or signatures -- although signatures are required for credit card purchases over AU$35.

Using a thin embedded antenna, the card or other device communicates with point-of-sale (POS) equipment, securely exchanging account information when the enabled device is held close enough.

PayPass relies on near field communication (NFC) technology, a cousin to RFID, to read data wirelessly within a maximum range of around 10cm. This makes it ideal for high-volume systems such as transportation and ticketing, petrol self-service and purchasing of small value items, typically newspapers or soft drinks.

These applications have proved popular in some geographies overseas, particularly in the US, Japan, South Korea and Taiwan, and PayPass is now found on 20 million cards in 19 countries -- including 2.5 million cards in 11 Asia-Pacific countries.

A recent trial of PayPass in Wollongong proved popular with consumers, with 140 participating merchants reporting that transaction volumes increased by an average of 13 percent. Other trials report benefits including a 40 percent reduction in wait times at McDonalds drive-throughs; a 35 percent increase in the volume of everyday purchases compared to conventional magstripe cards; and a 15 to 20 percent reduction in waiting time at participating stores.

Leigh Clapham, executive VP for Australasia with MasterCard Worldwide, said PayPass has been the fastest growing payment technology MasterCard has offered to date. "The ability to do things quickly at the point of sale has opened up new acceptance," he said.

Merchants pay around AU$5 a month extra to be able to accept PayPass. Customers of Commbank who have had a card issued in the past year or so probably already have the ability to use PayPass.

A Commbank spokesperson said the bank has already issued over 300,000 PayPass cards and is pushing 60,000 more cards into the Australian market every month, which should see the bank's entire fleet of nearly four million cards PayPass-enabled within around two years.

MasterCard has also licensed the technology to Visa International, ensuring that cardholders on both sides of the fence will be able to use the technology.

Although the first line of attack in the Australian market is through Commbank, MasterCard is counting on the system being adopted by other banks -- and the technology extending to a new breed of mobile phones equipped with NFC capabilities.

Nokia has been among the earliest adopters of the technology, and its phones were used in this week's demo, but Clapham cited industry figures suggesting that 30 percent of mobile phones could support NFC by 2011.

PayPass mobiles currently load a PayPass application that's registered with a PayPass account number, but in the long term, mobiles will be equipped with special secure memory areas and PayPass U-SIM cards that obviate the need for special software.

Rival Visa has already announced it will trial mobile contactless payments, using NFC, in conjunction with NAB and Telstra. The pilot will take place in Melbourne at the start of next year, with around 250 users who are customers of Visa, Telstra and NAB. The guinea pigs will be given a smartphone with NFC capability and be able to make small purchases using the handset in about 30 retail outlets that will be equipped with NFC readers.