Evan Schuman's StorefrontBacktalk

Which is stronger: the curse of contactless payment or the coolness of the iPhone? Last week, Visa said it planned to launch an add-on to Apple’s iPhone that will turn it into a contactless payment device for Visa’s payWave system. Or maybe not.

The fact that Visa, along with a three-year-old Texas startup called DeviceFidelity, issued a news release and almost immediately tried to retract it is telling. Then again, the fact that Visa thinks it’s possible today—in the age of Google cache and umpteen sites that seem to like publishing verbatim news releases—to take back a release after it’s published is itself a very revealing statement.

No one involved will admit why. Visa wouldn’t acknowledge the existence of the May 4 announcement at all. A DeviceFidelity spokesman would only say: “There was a press release and now there’s not.”

In many ways, this tale is so very much the life story of contactless. After years of promotion, customers don’t see any advantage to contactless retail payment–it’s no faster than swiping a card’s magnetic stripe. Many don’t even know they have contactless credit cards.

Retailers such as Subway and Home Depot are unenthusiastic about contactless even when equipment vendors all but pay them to install the necessary hardware and software. Early-adopter Best Buy has dumped support for Visa’s payWave because of high fees and low transaction volumes.

Contactless could really use something to make it cool—and something everyone wants.

Enter the iPhone. Apple’s products are cool. They’re elegant. They’re effortless. And when Apple makes an announcement, it’s orchestrated down to the smallest detail, complete with a tantalizing live demonstration and an audience packed with throngs of cheering Apple-lovers ready to hold their breaths until their new toy arrives—and, of course, Steve Jobs.

That’s the kind of cool the iPhone has. It’s a cool that contactless vendors would love to rub up against—and one that Visa would really love to have with payWave.

So what is Visa’s payWave offering for the sleek, elegant, effortless iPhone? To all appearances, it’s a clip-on case that attaches to the back of the iPhone 3G and 3GS. The case connects to the iPhone’s electronics through the dock connector and allows the iPhone to use a microSD flash memory card that can be installed in the case. Does it use alligator clips? Not quite, but it’s frighteningly close.

And why a microSD card? Because that’s the form factor Visa and DeviceFidelity have been working on for a payWave plug-in card. In February, the two companies announced In2pay, a device the shape of a microSD card that works on any smartphone with an appropriate slot. DeviceFidelity says it has successfully tested In2pay with 150 models of phones that have an external microSD slot to plug it into.

In2pay will plug into the iPhone, too, if you don’t mind using an add-on case to provide the microSD slot that the iPhone doesn’t have. And what iPhone lover would resist that? Right: all of them.