The key fob, which is a companion contactless payment device to the Citibank ATM/Debit card, is equipped with a radio frequency chip and will enable customers to make purchases at participating merchants by tapping a PayPass-enabled terminal. The purchase is then automatically debited from the cardholder's chequeing account.

Wayne Malone, SVP of transaction innovation, Citibank, says: "With the Citibank MasterCard PayPass, there's no fishing around for your wallet or waiting for change. It's safe, fast and incredibly convenient."

Customers will begin receiving their Citibank MasterCard PayPass device along with their new payment cards as the programme is rolled out.

Citibank says the initial New York launch this autumn will be followed by a roll out of 2.5 million PayPass debit devices across the US.

Earlier this month Cleveland-based KeyBank became the first bank in the US to offer its customers MasterCard PayPass debit cards. JPMorgan Chase is also issuing millions of contactless chip-based Visa and MasterCard cards, branded 'blink'. The contactless cards enable customers to pay for purchases by holding the plastic near a secure reader, instead of swiping the card or handing it to a cashier.

MasterCard has signed a number of retailers to its PayPass system, including US cinema operator Regal Entertainment Group and convenience store chain 7-Eleven. The system is also in use at some McDonald's restaurants in the US, and has been incorporated into the card loyalty programmes run by MBNA on behalf of the Seattle Seahawks and Baltimore Ravens. Other early PayPass triallists Ritz Camera and Boaters' World have also agreed to extend the technology to points-of-sale across the country.

American Express has been testing its ExpressPay contactless payments system at merchant locations in the Phoenix area since 2002 and in New York since 2003. The firm signed retailers Ritz Camera and Sheetz to the system earlier this year and has also said it will offer contactless chip functionality as a standard feature on all new Blue credit cards issued across the US.

Visa launched its own contactless system in the US market in February this year and has so far signed deals with convenience retailers 7-Eleven and Sheetz.