Smartphones To Replace Credit/Debit Cards?

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AT&T, Verizon Wireless and T-Mobile are said to be working out a deal to replace MasterCard and Visa cards with their respective smartphones. According to Bloomberg’s sources, the three U.S. mobile carriers are working in conjunction with Discover Financial Services (4th largest payment network) and Barclays PLC (bank) to test the system in Atlanta and three other U.S. Cities.

All aforementioned companies have declined to comment or given the usual PR spiel of ‘we’re always looking into new technologies’ or some variation. AT&T and Verizon are said to be equal partners in the venture with T-Mobile having a smaller stake.

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.

Tap-and-go or swipe-to-pay systems already exist in other countries (U.K., Japan and Turkey) and Citigroup introduced MasterCard PayPass stickers earlier this year that can be attached to the back of cellphones and used at over 230,000 U.S. merchants.

In May, the U.S. Federal Reserve Bank of Boston stated that consumers or merchants wouldn’t adopt the new payment system until availability and demand were high enough on both sides. The same report stated that merchants would have to spend $200 per reader and that mobile phone manufacturers would have to spend an extra $10-$15 to include the new payment system.

I’d love to leave the plastic at home but what redundancies would be available if I ever lost my phone? A PIN would make sense but what else?

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