Professional sports is not just about the games anymore. Some of the most innovative team owners are diversifying assets, creating sports and entertainment enterprises that span broad segments of the consuming public.

Kroenke Sports Enterprises owns a half-dozen sports and entertainment enterprises and venues in and around Denver, including the Pepsi Center (which will host this month’s Democratic National Convention). Kroenke even operates a cable sports network that showcases hometown teams.

So when Denver-based First Data wanted partners to help test a new approach to mobile payments, it didn’t have far to look: Kroenke had a brand new stadium and an up-and-coming soccer team to promote. The result was a unique new rewards program for the Colorado Rapids that has fans racking up points every time they spend money at Dick’s Sporting Goods Park in suburban Commerce City.

Rapids Kickback is a mini loyalty card that can be attached to a key chain or other personal item. Season ticketholders use the card for tap-and-go payments at the box office, team store and concession stands to earn points toward prizes. Jason Linscott, senior director of ticket sales and service for the Rapids, says about 2,000 season ticketholders had applied for the card as of early summer.

These pro soccer fans represent a highly sought-after demographic: 18- to 36-year-old males who tend to hold down white collar jobs and are adept at using technology. “They want a different kind of sports experience,” Linscott says, “so we have to be innovative.”

Rapids Kickback Cards come in three different colors issued according to the type of season ticket packages a fan purchases – onyx (five games), blue (nine) and burgundy (18). This segmentation alone has proved a valuable marketing tool. “Folks are really eager to get the burgundy card, because it’s loaded with extra benefits,” Linscott says.

The eventual plan is to create an environment where fans need only carry “one piece of inventory” for any purchase within the stadium. “We think it’s very do-able for the 2009 season,” he says.

One immediate benefit: it will help the company keep better tabs on fans’ spending habits and the popularity of various concessions and other items. “We see multiple applications on the back end,” Linscott says.

The underlying technology for the Rapids’ fan card, known as GO-Tag, was developed by First Data “to bridge the gap between the environment we find ourselves in today and the future,” when mobile payments are reality, explains Barry McCarthy, the company’s president of mobile commerce solutions. (First Data also supports the card through its rewards program platform.)

First Data refers to GO-Tag as a “form factor.” It comes in two models: as a mini-card and as a sticker that can be adhered to a personal item like a cell phone or badge.

Mobile a slow go in U.S.
Although mobile payments are popular in emerging markets, U.S. adoption has been stymied by the lack of NFC-enabled telephones. NFC (for near field communications) is a short-range wireless technology that facilitates communications between electronic devices – in this case, a GO-Tag and POS equipment.

GO-Tags contain NFC chips imbedded in stickers that can be placed on mobile handsets. The idea is “to get consumers used to the notion that they can make payments using their phones,” McCarthy says.

This is no easy feat, says Brian Riley, research director at TowerGroup. “You’re really changing the culture.”

There are only 10 million U.S. cell phone users currently performing financial transactions (like checking bank account balances, receiving bank alerts or sending payment instructions) using their mobile phones, according to Javelin Strategy & Research, but Javelin predicts that number could rise to 108 million by 2012.

Riley believes First Data’s scope of operations – it supports the issuance of about 400 million credit and debit cards in the United States – positions the company well to move the market to mobile payments. Using GO-Tags “seems like a very practical way to do that.”

NFC chips are rarely found in the mobile telephones Americans carry today, and carriers haven’t been convinced there’s a business case for supporting NFC in the United States. “It’s been a challenge getting [mobile] carriers to do it,” McCarthy says. That, in turn, has undermined merchant adoption of contactless terminals.

The Aite Group counts contactless terminals at about 40,000 U.S. merchant locations, the lion’s share (83 percent) of which are stores operated by large multi-state retailers like McDonald’s, CVS, BP, Walgreen, Jack in the Box and Petco. Most, if not all, of these terminals are used with key fob devices like PayPass.

Nick Holland, a senior analyst at Aite, expects 217,000 merchant locations will have contactless terminals by 2014, which he says would increase merchant penetration to 2.5 percent (from the current 0.7 percent).

First Data is betting that it can boost those numbers by getting cardholders to attach GO-Tags to their cell phones or other devices and, more important, by getting consumers to use them as payment devices. That, the company hopes, will sway mobile carriers to make NFC-enabled handsets standard fare in the United States.

“Over time we expect a significant share of the population will have [NFC] chips in their [mobile] phones,” McCarthy says.

For now, First Data’s primary focus in promoting GO-Tags is loyalty and pre-paid applications. And the company has an extensive portfolio of patents and patent licenses covering the underlying technology and associated security methods to support this foray, McCarthy says.

Contactless is faster
Contactless payments have been shown to be faster than any other form of payment, McCarthy says, and GO-Tags “appears to be a low-cost way to get [NFC-enabled mobile payments] out there.”

Data from Aite and the Food Marketing Institute suggests that it takes an average of 12.5 seconds to complete a contactless payment, compared with 48.4 seconds for credit and signature debit cards and 28.5 seconds for cash.

Riley says TowerGroup has identified about two dozen vertical markets in retailing “with low risk of fraud” that he considers ready-made for mobile payments. Among them: fast-food restaurants and dry cleaners.

TowerGroup expects that purchases of goods other than content for mobile devices will account for a meager share of mobile payments for at least the next several years, although actual spend will rise from $330 million in 2007 to $1.5 billion in 2012. In a research note released earlier this year, TowerGroup analyst Charul Vyas predicted that NFC-enabled payments using handsets at POS won’t exceed 10 percent of all purchases made with mobile telephones until 2012.

Working with partners like Kroenke, First Data hopes to get GO-Tags on large numbers of cell phones and consumers accustomed to using those phones to pay for goods and services. That, in turn, will get more merchants on board, and convince telecommunications companies to distribute more NFC-enabled phones in the United States.

“GO-Tag paves a pathway to the future where mobile payments are a reality,” McCarthy says.