US cellcos wage war on plastic with phone payments
Verizon, AT&T and TMo work together to sideline Mastercard and Visa
Published: 2 August, 2010
Consumers in Japan are getting accustomed to using their phones as payment cards, but trials in the rest of the world are going slowly. Most have been dominated by credit card giants like Visa, working with handset makers, but in the US users will be lured by the operators. Verizon and AT&T are planning a joint venture to break Americans' love affair with plastic and sideline Visa and Mastercard.
According to insiders, T-Mobile USA will also join the crowd, working with Discover Financial Services and Barclays. The first test will come at stores in Atlanta later this year, followed by some other cities. Customers will be able to pay by waving their smartphones at special terminals, and the payments will come from their bank accounts or carrier bills. The phones will incorporate the contactless payments technology, NFC, which has been adopted by vendors like Nokia.
"This is definitely a game changer," said consultant Richard Crone, which advises card networks. He pinpointed the carriers' competitive edge - they are "the biggest recurring billers in every market. They are experts at processing payments."
Apart from Japanese users, UK and Turkish consumers have also experienced mobile payments trials but these have not been broad-based, and some operators have displayed mixed reactions - Orange and O2, in the UK, have experimented with various partners and approaches but not launched in a big way.
The services from the three US operators would be processed through Discover's payments network, the fourth biggest behind Visa, MasterCard and Amex. Barclays will manage the accounts.
MasterCard and Visa have been investing in their own mobile solutions, Visa working with DeviceFidelity on a technology to turn current handsets, like iPhones, into payment devices handling multiple accounts. Visa says it is in talks with numerous cellcos round the world. And MasterCard has worked with Citigroup to launch MasterCard PayPass stickers that can be stuck to the backs of cellphones to make contactless payments at about 230,000 US stores.
Start-ups are also trying to get in on the act - for instance, Zong, Bling Nation and Boku which combine cellphone and web payment mechanisms. The main challenge is now to get merchants to accept the new payments and instal the terminals.
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