The retail point-of-sale thrives on one nutrient -- speed. Any element that can increase the velocity of a transaction -- and thus the amount of overall sales revenue -- is a worthy catalyst. Cash may be king in many aspects of financial life, but it rules nothing at the cash register itself; the unfolding of bills and the fumbling of coinage are nothing but frivolous frictions that must be eliminated.
JPMorgan Chase (NYSE:JPM) agrees with that assessment and wants to take advantage of Radio Frequency Identification technology (usually referred to as RFID) to facilitate some magic. According to an Associated Press article, the company intends to introduce "blink cards" in late June. What's so great about blink cards, you wonder? Here's the scoop: The cardholder merely waves the plastic rectangle in front of a special terminal that then receives encrypted information embedded in the card; the patron hears a sound (presumably some sort of beep) that indicates the payment process is a success, and voila -- the patron moves on with existence. No signature, no swiping action -- not even the dreaded duo of fuss and muss. (I can't stand those two cretins!) It's been dubbed "contactless payment."
Convenience chain 7-Eleven (NYSE:SE) will be giving the new payment protocol a spin, testing the technology at 170 stores; Reuters reports that McDonald's may check it out as well. Interestingly, much of the theoretical initial usage of blink cards focuses on places like convenience stores and fast-food joints, locations that traditionally have dealt with smaller cash transactions. I believe that big retailers such as Wal-Mart (NYSE:WMT) and Sears (NASDAQ:SHLD) have a huge amount of benefit waiting for them if contactless payment eventually reaches them. The key here is the no-signature aspect; when that is eliminated, then productivity in point-of-sale management is going to rise. Granted, there is risk in allowing high-dollar transactions to go by without a signature, but I think companies will adjust and will figure out ways to mitigate this issue. (For example, more sophisticated software could be developed to flag suspicious usage.)
The big criticism that JPMorgan Chase no doubt expects comes on the security front; the company says it has systems in place to prevent theft of information. As far as I am concerned, this is the direction that point-of-sale transactions are heading -- i.e., cashless and frictionless. And while I agree that security concerns are paramount considerations, there is nothing that will stop the cashless society from arriving. People want speed in their lives, and they will always be willing to accept a little risk if they can pack more activities into their already tight daily schedules. Also consider that people have been using cards of this kind at gas pumps for several years now, so we've already seen some acceptance. Of course, easier payment processing will lead to higher usage of credit cards. All Fools should be wary of the coming of the cashless society, for it could bring with it temptations that will lead to big debt levels.
It's clear that JPMorgan Chase is onto something transformational here, but it is not alone. American Express (NYSE:AXP) runs a similar initiative called ExpressPay, MasterCard operates its PayPass program, and Visa has Visa Contactless (appropriately enough). It will be interesting to see which payment brand ends up dominating this new arena. Retailers have a lot to look forward to. Smaller lines at the checkout are always a plus.
Further Foolish reading:
- RFID: The Billion-Dollar Savings Plan
- Beauty Secrets of Credit Score Stars
- How to Owe $40,000 by Doing Nothing
- Wendy's Success With Credit
What do you think of blink cards? Do you think they pose security risks? Let us know at the JPMorgan Chase discussion board .
Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
