Next Generation of Electronic Payment Options around the Corner

December 18, 2005 By M.P. DUNLEAVEY The New York Times

Almost faster than you can say "Will that be debit or credit?" the next generation of electronic payment options is taking hold in stores across the country.

Forget standing in line, swiping your card at the cash register, waiting tedious seconds for your purchase to be approved and then signing the receipt, while people behind you make restless rustling noises. Who has time for all that?

These technologies allow you to flash a card in front of a scanner, or touch a fingertip to a screen — and without so much as a ka-ching, the item is bought, your account is charged and you're out of there. Often without even a receipt.

The notion of flash payments sounds hip and fabulous, especially this time of year, when beleaguered holiday shoppers can feel like they waste entire weekends in the long approach to an electronic cash register (ECR). But the whole idea of paying in the blink of an eye — one new card, from Chase Bank U.S.A., is actually called Blink — raises financial red flags for me.

Given the increasingly wireless nature of things, the ability to upload, download and connect in nanoseconds, it makes sense that the relatively plodding world of payments would have to accelerate as well. According to a recent study by the American Bankers Association, Americans have been relying more on electronic payments than on cash since 2003. Cash and checks now account for only 45 percent of consumers' monthly payments, the study found, down from 57 percent in 2001.

While that survey takes into account only standard electronic options like credit, debit and prepaid cards and online payments, in recent years consumers have also embraced devices like the Exxon Mobil Speedpass and drive-through toll systems like E-ZPass. As many drivers know, these deduct gas and toll charges from consumers' accounts, more or less instantly, via a chip.

These innovations inspired credit card companies to use similar chip technology to create so-called contactless cards, so shoppers could make high-speed payments in stores.

An even more sci-fi-sounding technology uses consumers' fingers as the "transaction payment instrument," as the lingo puts it. Pay by Touch and BioPay are two companies that have developed systems that scan a consumer's fingerprint and link the scan to payment information. At the register, the customer touches a screen, which then transmits charges to the linked account.

Do consumers find these new payment options appealing? It's hard to say, but thus far David Robertson, publisher of The Nilson Report, which tracks payment trends, estimates that about 7 million contactless cards are in circulation; these and biometric or "touch" payments together accounted for $3.2 billion in transactions in 2005. By the end of the year, a Chase spokesman said, the bank plans to have about 5 million Blink cards in Denver, Atlanta, Philadelphia and New York.

The fingerprint method also seems poised to expand. This month Pay by Touch announced that it would acquire BioPay; combined they have several thousand touch-payment systems in retail stores already, with more than 2 million subscribers fingerprinted.This may not be entirely for your convenience or mine. Companies want access to what Robertson calls "the last frontier" of small cash payments. "It's a sizable chunk of transactions," he said — over a trillion dollars, by some estimates — and the swiftness of high-speed payments make it more likely shoppers will put a $4 latte on plastic.

It also practically guarantees that shoppers will spend more, as studies of ATM, debit and credit cards have shown. "People tend to spend more when they're using an electronic form of payment," said Tracey Mills of the American Bankers Association.

That is not just because it is easier to spend carelessly when all you have to do is flash a card embedded with a chip connected to your account. As our financial lives hit the high-speed lane, it's much harder to stay in touch with the ebb and flow of actual dollars and cents.

Mills disagreed, saying that many people find it easier to monitor electronic transactions than keep track of cash. That may be true for some, but in my experience most humans would rather eat their two-page, itemized checking statement than read it. Start adding newspaper, muffin and gum purchases, and the time you've saved by using insta-payments will be lost figuring out where all that money went — if you do any figuring at all.

Trying to be optimistic, Robertson had an idea that seemed even more onerous: Someone might devise yet another technology to help us manage these flash transactions.T

More