magine a cell phone dealer at a time when camera phones are just starting to hit the market. He thinks the idea is doomed to fail, so he decides not to stock the new products. By the time he realizes that his instincts were wrong, a competitor down the street has already raked in the cash and grabbed some of his customers in the process.

That's roughly the situation ISOs and merchant level salespeople (MLSs) face with the emergence of contactless payment terminals. After several years in the "look at this cool new technology" stage, contactless payment systems are finally ready for prime time. With the major card companies aggressively pushing a no-swipe strategy, both card issuers and leading merchants are signing on.

As of this writing, millions of Chase "blink" cards are being delivered to cardmembers, with approximately 1,800 merchant locations in 11 counties in New York, New Jersey and Connecticut alone. MBNA Corp. launched its own initiative in October with an initial rollout in Atlanta. Citibank, KeyBank and HSBC bank all have announced plans to issue debit cards and/or key fobs with contactless technology.

In the retail arena, major merchants including CVS/pharmacy, Meijer Stores, Regal Cinema, 7-Eleven, McDonald's, Sheetz and Wawa, have climbed on the contactless bandwagon for all their U.S. store locations. Others making the commitment on a market-by-market basis include Walgreen's, Eckerd, AMC Theatres, United Artist Theaters, Arby's, Carl's Jr., Cold Stone Creamery, KFC and Subway. Shell Canada is enabling in-store contactless payment systemwide.

The market will extend far beyond those early adopters. Industry researchers estimate that up to 8% of sales generated in quick service restaurants (QSRs), movie theaters, and video and game rental companies will be contactless-enabled by 2007. They have called the pace of contactless payment adoption "absolutely astonishing."

This embrace of tap-and-go payment systems is creating significant new revenue and customer retention opportunities for you. Every merchant that offers no-swipe payment needs no-swipe hardware. Get on the train now, or you will be left behind.

The ISO and MLS Opportunity

By embedding a radio frequency (RF) chip in a card or key fob, contactless payment programs such as MasterCard PayPass, Visa Contactless and ExpressPay from American Express Co. (AmEx) eliminate the need for consumers to physically swipe a card in a payment terminal.

Consumer account information is transmitted over RF waves to a new payment terminal with built-in RF capabilities. It also can be transmitted to a legacy terminal that was updated via a remote software download to support contactless and is attached in plug-and-play fashion to a small external contactless reader.

Whether selling or leasing contactless peripherals or new contactless-enabled terminals to merchants, you stand to gain significant benefits on a number of fronts. For your existing merchant customers, the addition of contactless technology is a value-added service that not only will generate incremental revenues but also will further solidify the customer relationship. The more services and applications that you supply, the less vulnerable the customer will be to another sales pitch. Contactless solutions offer an important new brick in the wall that you're trying to build against competitors.

For merchants with older terminals, the new contactless hardware enables you to make a convincing case for replacing aging equipment. Reasons to upgrade range from faster contactless checkout to the proven ability of contactless systems to increase average transaction amounts over cash payments. AmEx pilots have shown that contactless payment spurs spending increases of up to 30%, for example, presumably because consumers are not limited to the money that happens to be in their wallet. This enables merchants to achieve a rapid return on their investment.

Finally, contactless technology provides a vehicle for entering new markets such as QSRs that have traditionally not participated in the cashless payment world. This, of course, can generate a new revenue stream over both the short and long term by expanding the customer base.

The Target Markets

The best business prospects for contactless payment terminals are convenience-type merchants such as QSRs, movie theaters, convenience and drug stores, supermarkets, gas stations, drive-through coffee or donut shops and others with a particular need for rapid transaction speeds. Wave-and-pay systems are attractive to these businesses for two main reasons.

First, contactless payments are truly faster than swipe-based systems and even faster than cash. Chase's pilot blink card program found that transaction times in drive-through environments were reduced by as much as 20 seconds when using the card instead of cash. Not fumbling for bills and coins or counting change received from the merchant saves time and helps speed the checkout process.

Second, many of these merchants can skip signatures on most of their cashless sales because they usually have tickets less than $25 that are exempt from signature requirements under card Association rules. (More than 80% of convenience store transactions are less than $25, for example.) This adds to the time savings and helps allay concerns that credit/debit card payments will slow checkout lines.

In truth, however, practically any retailer is a candidate for contactless payment because of the faster service it offers to consumers and the increased operational efficiencies provided to merchants. With millions of contactless cards already in circulation and the numbers poised to soar as card issuers roll them out in new geographical markets, merchants in any industry may be open to tap-and-go equipment.

The Hardware

As noted earlier, there are two hardware options to offer merchants that want to go contactless. One option is to replace the retailer's legacy terminal infrastructure with new POS terminals such as Hypercom's Optimum L4100 that can be equipped with an integrated RF chip.

Technically speaking, terminals must support the ISO/IEC 14443 A+B standard for contactless card communications, designed to operate within approximately two inches of the POS terminal. Visa, MasterCard and AmEx have embraced contactless payment systems based on this standard.

(It is important to note here that RF terminals also incorporate traditional magnetic stripe readers, enabling the same terminal to process both contact and contactless transactions.) The other option is to attach contactless peripheral devices to the merchant's existing POS terminal population. Available from companies such as ViVOtech and On Track Innovations, these peripherals sit on the countertop, connect with a simple cable, and enable contactless payments with minor software changes to the terminal units.

This plug-and-play retrofit alternative is obviously less expensive than installing an entire new terminal system, but only certain terminals from certain manufacturers can support these peripherals. In addition, QSRs and other merchants that have not accepted cashless payments will not have any terminal infrastructure to retrofit. You therefore must weigh each situation carefully before making a recommendation.

The Get-ready Strategy

Given this background, following are a few simple steps to take to prepare for selling contactless systems:

1. Educate Yourself
   
   Learn which terminals have contactless capabilities, which contactless peripherals are certified on which terminal platforms, which resellers can supply you with those peripherals, and whether you need to establish direct relationships with the peripheral manufacturers. Ask your hardware vendor or reseller what contactless capabilities they offer, and talk directly to your processor/sponsor to confirm the hardware and software certifications that they accept.

2. Analyze Your Customer Base
   
   Determine which customers are in the market segments most likely to embrace contactless payments, what kind of hardware those customers have, whether that hardware has been certified with the available contactless peripherals, whether that customer might be ready to retire his organization's legacy terminals, and so on.
   
   Look for customers in other segments that are thinking about replacing their terminal infrastructure, and look for new opportunities in markets you haven't tapped yet such as QSRs.

3. Train Agents
   
   Help agents tell the product story and the benefits of contactless technology in simple terms. Arm them with key facts and figures such as those mentioned in this article. Be sure that they know the early adopters and the real value that contactless payments present to merchants, ranging from faster checkout to larger sales transactions.

4. Establish Incentive Programs
   
   Do this, especially if you are a large ISO. Use agents or telemarketing groups to generate leads, and then take over. Have them get their foot in the door, and reward them with a creative incentive program for doing it.
   
   Remember, contactless payments are here and catching fire with remarkable speed. According to the Smart Card Alliance, the rate of deployment is the highest for emerging products and technology in the payments industry in recent memory. It's not only a new way to pay but a new way for you to build revenue and fortify your customer base. Opportunity knocks. Or, in this case, it waves.

Lisa Shipley is Senior Vice President, National Sales, Hypercom Corp. E-mail her at lshipley@hypercom.com .