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Near Field Communication and all contactless technology

France-based Inside Contactless said it has received a follow-up order for 100,000 chips for contactless key fobs in Rio de Janeiro, Brazil–one of Latin America’s few contactless bank-payment projects to make it out of the trial stage.

Credicard, which is Citibank’s credit card administrator in Brazil, will issue the fobs this year to consumers in Rio de Janeiro. The fobs support MasterCard Worldwide’s PayPass application. The order follows about 35,000 contactless fobs Credicard issued late last year using Inside chips. Germany-based card vendor Giesecke & Devrient makes the fobs.

“At least we are refilling a 100,000 order; that means it’s not just a pilot,” Bertrand Moussel, Inside’s executive vice president of sales for Latin America and Europe, the Middle East and Africa, told NFC Times. “It’s something that at least has been deployed in a very focused geographic area for a very focused (base of) customers.”

Latin America is a tough market for contactless payment, since banks in the major countries of the region are rolling out fraud-resistant contact EMV chip cards. But they are hard-pressed to afford the cost of dual-interface EMV cards, which can run roughly US$5 in Mexico and even more in Brazil.

Contactless key fobs are cheaper, and MasterCard allows banks in EMV countries to start off with PayPass using less-secure magnetic-stripe authentication, as in the United States. EMV uses chip-based encryption and requires cardholders to authenticate themselves by inserting their cards from time to time and entering a PIN code—not an option with fobs. Banks in Brazil, as in the U.S., authorize all or nearly all transactions online, which increases security.

U.S. banks and credit card companies, however, had tried fobs a few years ago as part of their contactless-card rollouts, but the form factor failed to take off. Few, if any, U.S. banks now issue contactless fobs.

Brazilian merchant acquiring company Redecard has signed up a small number of merchant locations in Rio to accept the PayPass fobs, including some McDonald’s restaurants, along with the lift at Sugar Loaf Mountain and stations of the SuperVia train. MasterCard hopes to promote use of contactless cards and fobs at transit stations in Rio. But it’s not clear if consumers can pay for their fares directly with PayPass at the Sugar Loaf lift and SuperVia train stations, though they can probably only tap the fobs to get tickets.

MasterCard in November said soon PayPass cards and devices would also be accepted at the Rio de Janeiro Metro system. But enabling riders to pay directly at the gate would require substantial changes to the infrastructure of readers, as well as the back-end fare collection system.

Moreover, it will be difficult to get more cards or fobs into the Brazilian market, though a regional MasterCard executive reportedly said last fall the card network was in talks with a few more Brazilian banks to issue PayPass cards or devices.

Rival Visa Inc. has only conducted contactless pilots in Brazil, including one launched in June 2008 with Banco Bradesco of payWave EMV cards that cardholders could tap to pay at Starbucks coffee shops. Visa and two banks, including Bradesco, also held an NFC trial last year.

Elsewhere in Latin America, Mexican banks have only issued some thousands of contactless cards. That includes Banamex, which issued PayPass cards supporting EMV in late 2006 or early 2007.