Mobile Service Providers AT&T, Verizon, and T-Mobile are attempting to give credit card companies a run for their money with the planned introduction of new smartphone technology. This technology will allow customers to use their smartphones as payment devices by merely waving their smartphones. Should the technology be successful, credit card companies might have a lot to worry about.
While the technical details are sketchy, the service would let customers make purchases by holding a smartphone in front of an electronic reader in stores. Transactions would be processed by Discover Financial Services (DFS), the fourth-biggest payments network in the U.S. behind Visa, MasterCard, and American Express (AXP). London-based Barclays (BCS) would help manage the accounts, say the people, who requested anonymity because of confidentiality agreements. Representatives for the carriers, Barclays, and Discover declined to comment.
A recent Nilson Report stated that Visa and MasterCard accounted for 82 percent, or $2.45 trillion, of U.S. consumer spending on “general-purpose” cards in 2009. So why wouldn’t mobile carriers want a slice of that action? They are, after all, handling millions of payment transactions anyways. The move may favor not only consumers but retailers, as well. In 2005, merchants filed a federal antitrust lawsuit to approve a cap on “swipe” fees, which exceed $40 billion a year.
According to PRTM consulting firm partner Dan Hays, “Attempts from Visa and MasterCard so far have not been integrated at all with mobile devices. This goes way beyond a sticker on the back of a phone.”