InformationWeek

The business benefits are compelling. The wave of a transponder or the touch of a finger moves lines rapidly, especially since terminals are integrated into cellular networks. EZPass estimates one radio-frequency device moves 1,000 cars an hour, compared with 300 customers an hour with a human teller. Mobil's SpeedPass saves 30 seconds per transaction compared with credit cards, the company says. Some proponents say the new offerings can even increase business. Mobil tracked customers who used credit cards and switched to SpeedPass and found they made one more purchase per month.

Rather than fighting the trend, one credit-card company is an enthusiastic partner--at least for now. To Visa, every one of the billions of hamburgers sold by McDonald's before 1999 represented a transaction not posted on a credit card. Visa is now accepted in many fast-food chains and is being tested in Arby's, Burger King, and Subway, among others.

When fast-food outlets began accepting the Visa card in 1999, it generated $600 million in new charges. This year, Visa expects the sales stream from that channel to reach $2 billion, says Armen Khachadourian, Visa's senior VP of new market development. At 30 cents per transaction, that's about $180 million in fees.

Visa's objective for this year "is to partner with as many of these [micropayment] technology providers as we can," Khachadourian says. Visa would make more money by ensuring that its credit cards are accepted at every fast-food outlet, but some don't like paying the higher fees. Visa figures it might as well make something on every transaction, even if it's less than it normally would collect.

To Visa, the competition is on the back end, where the credit-card issuer will have to fend off its traditional foes, American Express and MasterCard. "We want to make sure we have top-of-the-line positioning and are the default" provider, says Khachadourian.

In its own cafeteria, Visa uses a fingerprint-based system from VeriStar that collects data on employee meals and charges the total to their cards. Even more popular nationwide are systems such as those provided by CBORD that link the cash registers in company cafeterias to the company payroll system and deduct the charges from employees' paychecks. Using such a system, DaimlerChrysler is getting a discount from its food-ser-vice supplier, Aramark Corp., in re-turn for sharing its purchasing data.

For all the promise, though, not everyone is convinced the world--or even the lunchroom--is better off forsaking cash. Some are worried that technical problems could emerge as more people adopt micropayments. "It's the bugs in the systemıor even the perception that there could be bugsıthat are key when you're talking about money," says Jakob Nielsen, a behavioral psychologist at the Nielsen Norman Group, which specializes in human adoption of new technologies. But, he adds, "I'm actually optimistic about this."

There are also important questions about privacy: Who will know every detail of every dollar that consumers spend, and what will businesses do with that information? Others say that for micropayment options to be successful, the world needs a single, ubiquitous device, not the variety of options that are emerging. Jean-Louis Bravard, managing director of EDS's global financial industry practice, says the battle will ultimately be waged between chips and cell phones. When it comes to processing these transactions, he says, banks and telecommunications companies will compete. The telcos are off to a strong start in Europe and Asia with offerings that let consumers charge everything from ski passes to soft drinks to their phone bills.

However, widespread use of the technology could stress the global telecom infrastructure. "Somebody will have to carry this messaging, and I don't think the infrastructure is ready for the sum of all that," Bravard says. "If everybody starts using a cell phone to buy a newspaper and coffee, is there enough bandwidth?" In addition, the slowing U.S. economy may discourage telecom providers from entering the micropayments market, he says-they're not as experienced in dealing with bad debt, should customers default, as banks and credit-card companies are.

Still, many believe that micropayment systems-in whatever guise they ultimately takeı-are about to heat up. Says Gartner senior analyst Avivah Litan, "Lunch is the space that's going to push out micropayments in the U.S."