Report: US wireless carriers looking to replace credit cards

Three national wireless carriers are teaming up with Discover and Barclay's on a pilot program which aims to enable consumers to use their smartphones as payment devices, sources have told Bloomberg News Service. AT&T, Verizon Wireless, and T-Mobile are planning to test the functionality in select markets.

Little is known about the potential service other than one of the pilot cities being Atlanta, and that the venture is currently searching for an executive to head up the new company. In any case, it could shake up the entire retail industry.

Currently, credit card companies hold a lot of power over retailers as their sheer popularity force their adoption. In turn, so called "swipe fees" -- the cost attached to processing each and every transaction -- has become a real issue. Thus, if mobile payments are offered at a lower cost, its adoption could be quick especially considering three of the four major wireless providers are supporting it.


Users would hold their phones near a payment device, which would then likely be paid through their cell phone bill. The service sounds a lot like what has been already available to consumers in Scandinavia for nearly a decade, but has seen little use elsewhere.

Discover's move to partner with mobile carriers may be an attempt to get a leg up on its competition. Larger providers Visa and MasterCard also have plans for mobile payment services, and have already begun offering "contactless" payments through NFC chips.

NFC -- or "near field communication" -- is a chip that sends out a low power wireless signal to a reader with a small set of information, in this case credit card data. The chips can be easily embedded into just about any electronic device because of their extremely small size.

According to research by the Boston Federal Reserve, the cost to add the technology to each handset would run about $10 to $15. New systems to process these transactions would cost retailers about $200, it added.

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