A brave new cashless society

KUALA LUMPUR, Malaysia – Picture this in the near future: you’re at a fastfood drive-through, but instead of having to fiddle around for cash and loose coins to give the cashier, you simply tap your credit card against an electronic terminal. Seconds later your receipt and a bagful of food arrives.

Or maybe you’re at a big-name coffee franchise, and you didn’t bring enough cash for that double decaf grandé mocchachino to go – so you simply press your wristwatch against a scanner, and seconds later you’re out the door.

Sounds very sci-fi, but it’s happening as we speak, and MasterCard International is behind the latest moves to make cashless transactions a way of life. At a special launch of the OneSmart PayPass system held at the Shangri-La Hotel in Kuala Lumpur last week, MasterCard demonstrated just how far they’ve gone to reduce credit card fraud and security risks – and in the process, removing cash from our daily transactions.

The PayPass system is not much different from the current credit card payment setup. The cashier is still behind the counter, entering the cost of your purchased items into the system (usually via barcode reading). There’s a carbon copy printer, but in front of it now sits an electronic reader. You simply tap your MasterCard against the electronic device. In most cases, there’s no need to enter a PIN or sign anything. Seconds later, the receipt is in your hands. And you’re out the door.

Journalists at the Shangri-La event were given temporary MasterCards and invited to try out the reader. The transaction is definitely quick, especially for anyone who has ever shuffled impatiently while waiting for an electronic printer to click out a receipt. With the PayPass system, you can be out the door before the ink on your receipt dries.

Launching it in Malaysia was no coincidence. Until recently, credit card fraud was rampant here – one of the highest rates in the world, in fact. Then in 2003, Malaysia made mandatory a new type of credit card technology – an embedded chip with a built-in radio frequency antenna. It’s called the EuroPay MasterCard-Visa (EMV) chip, and it does away with cashiers having to handle and swipe your credit card. It also does away with the security fears people sometimes have when making credit card purchases. Net result: credit card fraud dropped by 90 percent in Malaysia since the introduction of the EMV chip.

The OneSmart PayPass system is MasterCard’s state-of-the-art entry into Malaysia, and a host of local and international outlets (Starbucks, Kenny Rogers Roasters, Tower Records, Ace Hardware, local Vincci shoes and Modernmum Maternity, IMAX Theaters) have signed on to allow customers to make small-ticket purchases (generally under $25) with a single touch. This is ideal for people in a hurry – and nowadays everyone with a credit card seems to be in a hurry. Malaysians can now get movie tickets, gasoline, fast food, coffee drinks and other items with a flick of the wrist.

Shortly after MasterCard first launched PayPass in Orlando, Florida back in 2003, they found out some interesting things: first, people used their credit cards more often with the system, with purchases up by 23 percent. Also, they carried less cash, believing the card to be safer and more convenient. This, of course, benefits MasterCard International.

In truth, the people at MasterCard see this as a win-win for everybody, since it upgrades and unifies the technology for the banks and institutions issuing cards, and it increases the ease-of-use and sense of security for consumers.

You may well ask: What happens if the card gets stolen? Surely it’s easier to commit fraud when there’s no PIN or signature required for purchases. This is why MasterCard is – for now – limiting the use of PayPass to low-cost purchases, and urges those whose card is lost or stolen to report it as soon as possible, just as they would with any other credit card. Also, the same "zero liability" consumer protection offered in the US applies to customers in Asia when they make PayPass purchases.

The Kuala Lumpur launch was attended by MasterCard International reps and local merchants, while the keynote address was given by YB Datuk Mohd. Shafie bin Hj. Apdal, Minister of Domestic Trade and Consumer Affairs, who declared Malaysia’s credit card landscape to be "one of the safest in the world compared to two to three years ago."

Jim Cheah, vice president and senior country manager for MasterCard International in Malaysia and Brunei, noted the new product was "timely" for today’s fast-paced customers. "In a world where time is essential., this launch marks another chapter of growth for Malaysian customers."

And the rest of the world, too. As of now, noted Shuan Ghaidan, group head of Product Sales and Delivery for MasterCard International, there are "more than 4.3 million MasterCard PayPass cards and (keychain) fobs in circulation around the world, with approximately 25,000 merchants" with PayPass terminals. Soon to come, PayPass terminals for the New York subway system. And in Canada, Citi Cards will team up with Petro-Canada to launch their own PayPass system soon. With Taiwan already moving to make EMV cards mandatory for its bus system, maybe we’ll all eventually do away with scrambling for loose change when hopping on public transport.

In a side meeting, Ghaidan outlined a bolder future for PayPass and "contactless payments" in our day-to-day transactions. Saying this is yet "another step toward the ubiquitous payment system MasterCard has been aiming for since 1966," he said it’s "very possible" that the technology could be used for five-star hotels in the future. (Which, of course, would please business travelers no end.)

After that, who knows? Airline tickets? Major appliances? It really is a brave new world.

While he acknowledges Malaysia’s fraud problem had hit epidemic levels, Ghaidan notes MasterCard was already there with an answer. "We were reactive enough (to the problem) to push very hard to get this technology on the market, but we were also proactive enough to be there with a solution."

How it is used, of course, will depend on the participation of merchants, the acceptance of the public, and the security of the product. For now, Ghaidan emphasizes, "PayPass is simply a delivery system."

All this got me wondering how Filipinos would take to Pay-Pass. It turns out Bank of Philippine Islands (BPI) already launched a PayPass pilot program back in January 2005. On hand at the Shangri-La event was Antonio Corró, director of operations and member relations for MasterCard International. He said local merchants like Tokyo Tokyo and Seattle’s Best took part in the pilot launch, and promises more innovations to come. Soon.

In the Philippines, it probably won’t be security and fraud concerns that will drive acceptance of the PayPass system. "The fraud (there) is still controllable, still very manageable," Corró noted.

Rather, it will be the high-tech toys that lure Filipinos, who go absolutely ga-ga over gadgets. "We’re very excited about the PayPass potential for the Philippines," he added.

Corró then showed me a special wristwatch commissioned by MasterCard with a built-in credit card. The Laks SmartTransaction Watch is activated by inserting the EMV chip from the included credit card into the back of the timepiece. Like a cell phone SIM card, the EMV chip contains a unique set of codes and commands, and acts as your personal ID at the same time.

Its applications include network log-on, biometric access, electronic ticketing and credit card payment, loyalty card (or "bonus point") functionality, and secure data containment. It also has a USB cable, so you can transfer data straight from the watch to a PC.

So this is how daily transactions with your wristwatch will become a reality in the contactless, cashless future.

And this is where the future gets an awful lot like James Bond films.

Will we soon see Filipinos making quick payments with their watches, key fobs and mobile phones? "Yes, I’d say yes," Corró agrees with a nod, though he won’t give the whole game away until the toys are officially launched, hopefully before the end of this year.