CVS TO ROLL OUT 'CONTACTLESS' PAYMENT NATIONALLY

MICHAEL GARRY

WOONSOCKET, R.I. -- CVS here plans to roll out a radio-frequency-based payment system at its more than 5,300 stores by mid-2005 in one of the largest retail deployments of RF point-of-sale payment technology, according to American Express, New York.

Part of a growing wave of RF payment devices, also called "contactless" devices, the CVS system is called ExpressPay, from American Express. It allows consumers to pay for purchases by waving a key fob or specially embedded American Express card near a reader at the checkout counter. No signature or PIN is required.

Using the device, shoppers can put as much as $150 of purchases per day on their American Express card, or prepay up to $600 per month on any major credit card, charge or debit card. A "digital signature" is employed to validate each transaction. Consumers are not liable for fraudulent charges.

ExpressPay has been tested at a number of retail outlets in Arizona since July 2003, said American Express. These include 23 CVS stores and 48 Fry's Food and Drug Stores (Fry's is a division of Kroger, Cincinnati), as well as Carl's Jr., Blimpie Subs & Salads, Chevron Texaco, Dairy Queen, Cold Stone Creamery, Ritz Camera, Schlotzsky's Deli and others. American Express is also testing the device in New York at retail outlets at the World Financial Center in lower Manhattan where it is based, and in Singapore.

CVS has tested ExpressPay at 485 stores to date in Arizona, Texas, Florida, Louisiana, Mississippi, Kansas and Missouri, said American Express. "ExpressPay offers a speedy, convenient alternative to traditional payment types, helping to improve the overall speed of checkout," said Jon Roberts, senior vice president of store operations, CVS, in a statement. CVS did not respond to requests for further comment.

American Express said its studies show that checkout time is reduced by 30% to 40% with ExpressPay. In addition, it said, ExpressPay users increased their average transaction size by 20% to 30% compared with cash spending.

ExpressPay follows the ISO 14443 standard for conducting RF payments. CVS uses a separate reader for ExpressPay, though transaction terminal suppliers are integrating RF reading capability into their credit and debit card terminals, said American Express. ExpressPay leverages the normal transaction network.

ExpressPay is similar in operation to the ExxonMobil Speedpass payment system used at Mobil fuel stations and convenience stores nationally. A two-year test of the Speedpass system at 20 stores operated by Stop & Shop, Quincy, Mass., was discontinued in September, said Robert Keane, a Stop & Shop spokesman. "We were willing to go forward but Speedpass did not want to," he said. The system has also been tested at McDonald's in the Chicago area.

In August, McDonald's announced it would test MasterCard's RF payment system, PayPass, beginning with outlets in Dallas and the New York area. PayPass, introduced in 2002, was also tested at merchants in the Orlando, Fla., area.

RF technology is also used in toll passes and in the RFID tags being tested by Wal-Mart and others.

According to Judy Tenzer, a spokeswoman for American Express, consumers fill out and mail a form to receive an Expressway key fob or credit card in the mail. She would not say whether the merchant discount rates differed for ExpressPay purchases compared to other American Express purchases. She confirmed that Walgreens last week, citing high transaction fees, said it would stop accepting American Express cards beginning Jan. 14.