The Rush to Contactless Payments.

Suddenly, there's a rush to add contactless payment chips to cards, keyfobs and mobile phones, especially in the United States and Asia.

Do consumers really love the pay-with-a-wave convenience, or is this just the latest fad?

What do credit and debit card issuers want? They want their cards pulled out of consumers' wallets as often as possible so as to maximize their revenue from merchant fees and interest on credit card balances.

What they don't want is powerful newcomers in the payments arena. That's become a real fear as they've seen U.S. consumers paying at McDonald's with their ExxonMobil SpeedPass tokens, Hong Kong's Octopus transit chip card become accepted widely at retail shops, and Japan's leading mobile phone network operator, NTT DoCoMo, establish itself as a payments processor with its i-mode service for selling stuff to cell phone users.

That potent cocktail of threat and opportunity is fueling a sudden burst of interest in adding contactless payment functionality to credit and debit cards-or to devices ranging from keychain charms to mobile phones-so that consumers can pay with a wave, especially at locations like fast food restaurants, gas stations and video stores where the purchase amount is low and the demand for convenience is high.

Issuers hope contactless technology will help them convert the mostly cash payments at such locations into card transactions. And they hope a card with a contactless chip will move to the front of the wallet, so that the magnetic stripe that will also reside on the card will be used more often for larger purchases.

MasterCard, in particular, seems bullish on contactless, promising major rollouts in U.S. markets by early this summer, and 4 million to 6 million MasterCard PayPass cards in circulation by the end of the year. "We believe it's going to take off," says Art Kranzley, chief e-business officer at MasterCard. "There's a solid business case for all parties in the transaction."

MasterCard is not alone. American Express has piloted its ExpressPay contactless product in corporate cafeterias and in a consumer test in Phoenix. Last month, AmEx planned to launch a pilot with 2,000 consumers in Singapore. Visa International, while so far quiet in the U.S. market, is involved in several projects elsewhere, including rollouts of contactless payment services with tens of thousands of consumers in South Korea.

Stars Align

These card industry heavyweights are hoping to tie together several technology trends. For one, contactless smart card technology has become more mature, and now is used by tens of millions of commuters worldwide for paying transit fares. Add that to the growing ubiquity of mobile phones and a decided uptick in the use of payment cards in such previously cash-based markets as Asia, Latin America and Eastern Europe.

Given those trends, rather than fumbling for cash or pulling a card out of a wallet, wouldn't consumers rather just wave their cell phone or keyring past a payment terminal?

That, in fact, is the big question: Will enough consumers want to pay this way that offering contactless payments will mean new business for card issuers?

Merchants must also be …