AT&T and Verizon go after credit cards with smartphones - report

By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- AT&T, Verizon and T-Mobile are teaming up to compete with credit card companies by allowing customers to pay for products by waving their smartphones, according to a Bloomberg report.

Rather than swiping credit cards, wireless customers could simply place their phone in front of a wireless reader. The technology would likely include a unique radio frequency identification (RFID) tag embedded in the phone that would be associated with a customer's account.

The Bloomberg report lacked specific details of how the system would work, but there has been talk for years of putting such a system in place in the United States. Similar mobile payment systems are already widely used in Scandinavian countries and Southeast Asia, and many Third World countries wirelessly transfer mobile credits from phone to phone as a form of currency.

Credit card companies like MasterCard (MA, Fortune 500) and Visa (V, Fortune 500) have tried to unveil a version of mobile RFID technology for their customers, including key chain swipe passes and stickers that can be placed on the back of cell phones. But telecom analysts say what the telcos are planning would give several added benefits to consumers.

"Attempts from Visa and MasterCard so far have not been integrated at all with mobile devices," said Dan Hays, a partner at consulting firm PRTM. "This goes way beyond a sticker on the back of a phone."

Hays said if the RFID tags in phones were hooked up to the phone's electronics, users could link several accounts to their device and choose which one to pay with after each swipe. Paying with a mobile phone could also potentially be much more secure than with a credit card: a phone could be set up to ask for a password before each purchase, and the RFID tag could be shut off remotely if a customer lost his or her phone.

If the payment systems become successful, the telecom companies could eventually create a whole new business for themselves: banking. Retailers are growing increasingly unhappy with the status quo, as credit card and debit companies charge stores significant interchange fees on each purchase. Though it's unclear if and how the wireless companies plan on charging retailers, a credit card competitor would likely be welcome in retail circles.

"This is a potentially huge opportunity for AT&T (T, Fortune 500) and Verizon (VZ, Fortune 500) to get into the payments game," Hays said. "It creates an opportunity for wireless operators to become credit card companies."

Discover (DFS, Fortune 500) and Barclays were named as likely partners to link up accounts with the mobile payment systems.

"Discover is always evaluating technology solutions that make things faster, safer, and more convenient for card members, merchants, acquirers and issuers," said Leslie Sutton, a Discover spokesman.

Verizon and T-Mobile declined to comment. AT&T wouldn't comment on the specifics, but spokesman Mark Siegel said, "We are always looking at ways to serve customers better, and mobile payments is a logical step for consumers." To top of page

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