Smartphone credit card processing using contactless payment technology could soon have wireless carriers giving credit card companies a run for their money. AT&T,Verizon and T-Mobile are preparing to take on Visa and MasterCard by developing their own mobile payment system that lets customers purchase goods by waving a smartphone in front of a wireless reader. Retail associations, which have battled credit card companies over excessive swipe fees, are welcoming the competition in the payments market.
Smartphone credit card processing a ‘game changer’
A payment service network to supplant credit and debit cards with smartphones will begin with a test system in Atlanta and three other U.S. cities. Bloomberg reports that the service, similar to those already available in Japan, Turkey and the U.K., would use contactless technology. One business analyst told Bloomberg that the AT&T/Verizon smartphone credit card venture was a “game changer” because the wireless carriers are the biggest recurring billers in every market and are experts at processing payments. Discover, the fourth largest credit card company after Visa, Mastercard and American Express, is handling processing for the new payment service network
Obstacles to contactless payments in the U.S.
In Japan, more than 60 percent of mobile phones have contactless payment capability. But in the U.S., Tech News World reports that fundamental issues to overcome include credit risk, banking regulations, security and liability. If smartphone credit cards take off, hackers will have added motivation to focus on cracking the system. And consumers will need the same protection for their smartphones that they have against unauthorized purchases with lost or stolen credit cards.
Competition intense for mobile payment billions
The wireless carriers aren’t alone in their pursuit of mobile payment billions. ChannelWeb reports that credit card companies and technology firms have stepped up the pace of their mobile payment initiatives as the smartphone marketplace has boomed. Wireless carriers believe their background in payment processing is a competitive advantage. But Joe Bardwell, of Connect802, a California wireless solution provider, told ChannelWeb he wonders how processing payments for their customers will translate to servicing merchant accounts directly as a payment service network. Plus, consumers that already don’t care for the wireless carriers’ billing practices may not trust them to handle credit card payments.
Retailers welcome payments market competition
Retailers could gravitate to another payment service network after years of fighting over transaction fees set by Visa and MasterCard. The Bloomberg article mentions that merchants persuaded Congress last month to approve caps on interchange, or “swipe” fees, for debit transactions and filed a 2005 federal antitrust lawsuit that is still pending. A spokesman for the Retail Industry Leaders Association told Bloomberg that a secure and reliable competing network that gives consumers mobility payment options and reduces retailers’ costs would be welcome.
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