Cell Phone Looks to Replace Credit Cards
Posted by | Posted in Credit Repair | Posted on 05-08-2010
AT&T, Verizon, and T-Mobile are looking to replace the one billion outstanding credit cards in the United States with smartphones, according to sources familiar with the matter, who informed Bloomberg of their plan.
The system could possibly rely on Discover and British banking giant Barclays, allowing consumers to pay for items with a contactless wave of their phone instead of pulling out the plastic.
Discover would provide the payment processing system, currently the fourth largest behind Visa, MasterCard, and American Express, while Barclays would manage the accounts of customers.
Visa and MasterCard already dominate the space, with a collective 82 percent share of the $2.45 trillion spent on consumer cards last year.
They make money with interchange fees, which exceed roughly $40 billion a year and average about 1-2% of every debit/credit transaction.
The credit card issuers themselves wouldn’t be replaced, but rather Visa and MasterCard would face competition on those interchange fees, which could spell relief for retailers and possibly consumers if prices were lower as a result.
The big drawback is implementing the technology to make it all work, which could prove costly and delay a widespread launch.
Similar services are already available in numerous countries across the globe, in places like Japan, the U.K. and Turkey.
Credit card and electronic payments now account for more than half of all consumer purchases in the United States, compared with about 36 percent in 2003.
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