Contactless card transactions require cards with a special chip that enables the transactions and point-of-sale terminals equipped to read the cards' signals. Until enough of those terminals are available in a given area, it won't matter how many contactless cards a credit union issues.

"One of the most important things a credit union starting a contactless program has to consider is whether there are enough terminals in its community for its members to use the cards," said Tom Gandry, chief debit officer for PSCU Financial Services. "Fortunately, both Visa and MasterCard provide some help in getting an idea of where those terminals are and how prevalent they might be in a community."

The businesses where contactless terminals are showing up earliest are those where the consumer is often rushed or where there is a premium on moving customers quickly. Thus, quick service restaurants like McDonalds and Burger King have been early adopters, along with coffee shops and dry cleaners where the amount of the transaction is generally low.

South said one driving factor for her credit union, located in the New York City metropolitan area, was when the city's taxicab fleet moved to contactless technology.

South said that her credit union members have taken to the cards enthusiastically. In roughly 12 months since rolling out the cards, Novartis has seen its total debit card transaction volume increase by 9.4% and transactions per active account are up by 19%. The credit union has an estimated 1,600 active debit accounts and about 7,000 members.

The credit union's members do 32,000 transactions monthly, and its debit sales volume has increased 8.6%.

Gandry reported that Novartis is the only PSCU member credit union to adopt the technology so far, but said he hopes the increasing prevalence of contactless terminals will lead other CUs to make the jump into contactless issuing. He was encouraged, he explained, by the news that one of the major manufacturers of point-of-sale terminals recently announced that it would routinely include contactless technology in its newest terminals.

"The more terminals that are available," he noted, "the stronger case can be made for getting the program started."

Chris Gunnare, senior vice president for account management for The Members Group, largely agreed with Gandry and pointed out that the credit unions in more urban, technologically advanced areas make the best candidates for picking up the contactless technology quickly.

Gunnare said that between five and 10 of the processor's 200 client credit unions have started issuing contactless cards.

The most recent was the $1.9 billion California Coast Credit Union, headquartered in San Diego, which has announced it will start phasing in the cards.

Gunnare also noted that the technology provides a relatively low-cost way for a credit union in a competitive market to get a jump on other financial institutions. "Those credit unions that want to have an edge on the competition have also been very open to this technology," he said.

Both Gunnare and Gandry said some credit unions might hold back from adopting the technology because of the higher costs of the cards. Contactless cards can run between $1 and $1.50 more to produce than standard debit cards, but Gunnare pointed out that the increased card use and interchange can make up the start-up costs in the first two months.

In addition, while the technology is still new, there might be help from processors and the brands to defray some of the start-up costs.

South confirmed that Novartis received a good deal of help from PSCU and Visa in getting its program underway.

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