hrough an agreement announced Aug. 18, 2004, McDonald's and MasterCard will partner to offer the fast-food chain's customers the option to use contactless cards to pay for their meals. The program incorporates MasterCard's PayPass radio frequency (RF) technology and is an extension of the agreement McDonald's reached with MasterCard earlier this year to accept payment cards.

Other companies participating in the partnership include VeriFone, Inc., which is providing its Omni 7000 terminals and Axalto, which is supplying contactless cards. Using contactless cards involves merely waving or tapping an RF device on or near a terminal enabled to receive and transmit the transaction information.

The process not only speeds up transaction times, but as with other payment cards, customers spend more for purchases than they do with cash. Participating McDonald's restaurants in metropolitan New York and Dallas will implement PayPass later this year; more locations will implement contactless payments systems throughout 2005.

On the issuing side, card manufacturer Axalto supplied more than 10,000 cards to the PayPass pilot program in Orlando, Fla. Francois Lasnier, Axalto Vice President, Finance, Retail, Access and ID, said the company worked with three main issuers in the pilot, but now that the program is open to all MasterCard issuers, it has talked to as many as 10 issuers for RFID chip card mass production.

Lasnier said that despite some initial challenges to acceptance, and certain equipment requirements, such as the plastic having to withstand stresses and design, Axalto is optimistic about the implementation of PayPass at McDonald's, and beyond. "We are expecting good demand coming up," he said.

While initial deployments will use traditional cards, Axalto has tentative designs for an RF key fob that could be piloted next year. The company produces the cards in its plant in Owing Mills, Md. McDonald's has more than 13,500 restaurants in the United States. Of those, 4,500 are currently equipped to accept cashless payments; the company plans to increase that number to 8,000 by year's end.