Tuesday, May 24, 2005

Blink and Your Money’s Gone

Last week JP Morgan Chase, the largest credit card issuer in the United States, announced the launch of its new Blink cards. According to the fact sheet issued by JP Morgan, the Blink cards use contactless payment technology to process transactions. Rather than handing over your card to the cashier to be swiped, the customer waves the Blink card in front of a special terminal. RFID technology securely transmits the required data to complete the transaction. Blink cards also contain magnetic strips and are backwards compatible with the traditional swiping technology. Transaction time is cut by 10 to 40 percent versus traditional cards at no additional cost to the consumer. Merchants such as 7-11, CVS, and Regal Entertainment have already signed up for the Blink terminals.

There are however a few drawbacks to this new system. According to the staff at DigitalTransactions.net, widespread adoption of this new technology will be slow, and not without its problems. Merchants must spend an additional $100-$150 to install the new terminals. This new technology is primarily designed to replace “low-cash” transactions, such as purchases under $25. Would a merchant be willing to pay a fixed cost, along with a transaction cost, to replace a simple cash transaction?

There is also the issue of compatibility. Mike over at Techdirt.com wonders if differing proprietary systems will cause the market to fragment. Merchants will be unwilling to install multiple terminals for each bank’s competing cards. Coupled with the consumers desire to have one easy to use system, these kinds of problems might be the death of a promising new consumer technology.

However, we do see multiple benefits to this new payment system. Jenny Strasburg of the San Francisco Chronicle writes, “Faster, no-contact credit transactions will speed up lines in convenience stores, movie theaters and fast-food restaurants.” We couldn’t agree more Jenny. She also points out “The different credit card issuers are using standardized radio-wave technology that allows various credit-card brands to be read by the same scanners.” This speaks to the issues raised about differing proprietary systems and the problems that it might cause.

Our opinion is that this new technology being pushed by JPMorgan Chase will be an enormous benefit to the average consumer. The system will provide its users with a fast, secure, easy to use credit card that saves valuable time. No longer will the customer have to sign his or her name when using a credit card, a practice that has gained widespread acceptance amongst users with the growth of Internet shopping. The benefits of saving transaction time are immediately recognizable to anyone that has stood in a long, frustrating line at the checkout counter.

With 90 million credit card users, JPMorgan Chase has the influence necessary to gain immediate support from merchants. Privacy concerns will be a non-issue since customers are not liable for transactions made from a stolen card. The backwards compatibility of the Blink card will be a benefit to merchants and consumers alike. Even if a store does not have the wireless terminal, a customer can still swipe it the old fashioned way.

The technological advancements of the past decade have dramatically increased the pace of our lives. With these changes, time has become a very valuable commodity to the American consumer. The Blink card addresses this shift in consumer preferences by reducing transaction times and might significantly reduce time wasted standing in lines.

There will always be resistance to new technology by those who fail to see the long-term benefits. $100 terminals are a small price to pay for your customer’s satisfaction. In fact, those merchants who resist the new technology may see less traffic as consumers refuse to stand in their long lines. If you could avoid a 10-minute line to buy a bottle of Coke, wouldn’t you get a Blink card? The bottom line is this technology gives people what they want, less wasted time. It provides consumers multiple benefits with little cost to all parties involved. Students of the GSB certainly understand the frustrations of waiting in slow moving lines. Could JPMorgan please talk to the cafeteria on the 2nd floor of the Gleacher Center? After that, could they please speak with the owners of the parking lot?

Michael Antonelli

Steve Dormanen

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