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U.S.-based Citigroup will announce later this month the launch of contactless payment stickers in the United States, part of a possible national rollout, NFC Times has learned.

Citi plans to order some hundreds of thousands of the stickers for the commercial launch, NFC Times has learned. Customers will be able to attach the stickers to their phones or other devices to make low-value purchases. The Citi stickers are expected to be issued in several U.S. cities and carry a MasterCard PayPass credit application, which is accepted at about 70,000 merchant locations in the U.S., along with some taxis and vending machines, as well as locations abroad.

While the stickers are passive, that is, the payment application will not be able to communicate directly with the phone or mobile network–and Citi is ordering fewer than a million, at least for the first tranche–the launch could signal a larger mobile-payment initiative for the bank. More sticker orders could follow, as well as more sophisticated contactless-mobile payment devices, including NFC phones or contactless microSD cards, when these products become available.

A Citi spokesperson could not be reached for comment on the launch and details were still sketchy on the rollout before the announcement.

But Citi executives during the past several weeks have not discouraged speculation that the bank is preparing to introduce mobile payment. It has been playing up the results of a large payment trial using NFC phones that Citigroup’s growth ventures unit along with Citibank India held late last year with the Vodafone mobile operator in Bangalore, India, even though users did not like the only phone available for the pilot, a mid-tier Nokia handset.

“It’s up to us to really crack the challenge and even consider technology alternatives if there are some available,” Satish Menon, executive vice president in Citi’s growth ventures unit in Asia-Pacific, told NFC Times last month.

Mobile-Payment Penchant
Citi has been the most aggressive of the U.S.-based banks in trialing contactless-mobile payment–holding at least four NFC pilots globally. That includes one in New York City in 2007, enabling about 300 holders of its contactless key-fobs and cards to tap for rides on the subway and for retail purchases. The following year, Citi had a prototype of a small branded NFC phone produced, though they didn’t distribute it. It has also experimented with network-based peer-to-peer payment.

The bank has never bought into the contactless card concept like competitor JPMorgan Chase, which has issued more than 30 million cards since 2005. Citi had issued perhaps a couple million key fobs and cards, mostly carrying debit applications, a few years ago, but has made it clear it was angling for mobile payment.

Still, critics of passive stickers say they are little more than contactless cards stuck to back of phones since they cannot communicate with the handset. And one of the largest sticker trials to date, launched last year by U.S.-based payment card issuer and network Discover Financial Services, found users often hid the stickers–along with the brand–because they did not want their phones identified as payment devices. Moreover, prepaid contactless stickers with a Visa payWave application onboard distributed starting last year by U.S.-based processor First Data at three retail chains in the U.S., including 7-Eleven convenience stores, has failed to catch on. First Data plans to introduce contactless microSD cards for payment later this year.

“The stickers are pretty much loathed by the end user,” Nick Holland, senior analyst at U.S.-based research and consulting firm Aite Group, told NFC Times. “They don’t want to deface their devices, neither do they want to telegraph that they have a payment device. For a thief, not only are they getting a hold of an iPhone, but they are getting a hold of the payment device.”

But a successful sticker launch by Citi could boost flagging interest in contactless payment in the U.S., where most consumers remain unaware of the technology, even if they carry contactless bank cards in their wallets.

And contactless stickers are about the only option available today for contactless-mobile payment. There are few NFC phones on the market. And peripherals that could communicate with the phone and mobile network, such as contactless microSD cards and “active” stickers that pack both NFC and Bluetooth chips, are still in the prototype stage. Citi had considered issuing mobile skins embedded with passive contactless chips, which some consider more stylish than the small square passive stickers, but these are not yet ready for the market either, a source said.

Eager to Launch
Apparently, Citi is not willing to wait any longer to introduce mobile payment.

Menon of Citi’s growth ventures unit refused to put down passive stickers when given the chance in an interview last month.

“There are advantages to stickers,” he told NFC Times. “It’s a lower cost. You’re able to satisfy the end (goal of mobile payment), even though it doesn’t satisfy the technology purest.”

It is possible to communicate with customers over the mobile network after they pay with passive stickers. Some banks and telcos are testing transaction alerts tied to payment stickers. They send the alerts or other messages after users tap the stickers at the point of sale and after the transactions go through the processing network. It’s not clear whether Citi plans to offer mobile transaction alerts with its stickers.

France-based smart card supplier Oberthur Technologies is expected to produce the stickers for Citi, using a contactless chip from Infineon Technologies–though the contracting process is not yet completed, said sources. The order might include some contactless cards, as well, a source said.

Martin Ferenczi, managing director of Oberthur’s Americas division, declined to confirm Oberthur is tipped to receive the Citi order or to name any banks planning to issue stickers in the U.S. But he added:

“There is not a question we are seeing quite a few institutions with particular interest,” Ferenczi told NFC Times.

Ferenczi had announced a year ago that a few banks, including a large U.S. issuer, had already ordered the vendor’s FlyBuy stickers, some of which had already been shipped. But no banks rolled out stickers, perhaps postponing their launches because of the economic crisis.