Smartphones Look to Replace Plastic as Payment
Okay, so the gas-powered car killed the horse and buggy
as a mode of transportation (excluding the Amish). Video apparently killed
the radio star. So what’s next to go? According to a Bloomberg report,
plastic credit and debit cards may be doomed by smartphones.
As it turns out,
a number of wireless carriers, including AT&T, T-Mobile
and Verizon, along with Discover Financial Services and Barclays, have formed
a partnership and are testing a system in four U.S. cities that allows consumers
to pay for purchases with a wave of their smartphones.
The service being tested
is said to be similar to those already in place in Europe and Asia. Discover
would process payments and Barclays would help with the management of accounts.
successful, the test could be the beginning of real competition for MasterCard
“What is a cell phone, except a mechanism for consumers to address their
lives in whatever way they choose,” Gary Townsend, CEO of the Hill-Townsend
Capital hedge fund, told Bloomberg. “There’s certainly no
reason if an AT&T account can effectively be carried on a phone that a
JPMorgan or a Wells Fargo card can’t be there, too. In fact, the antitrust
issues would demand that that be allowed.”
Retailers, many of which have been engaged
in a rancorous dispute with the major credit card companies over interchange
fees, are generally supportive of any alternatives that make the payment market
emergence of a secure and reliable competing network that serves the demand
from consumers for mobility payment options and reduces retailers’ costs
would be welcomed news,” Brian Dodge, a spokesperson for the Retail Industry
Leaders Association, told Bloomberg.
Discussion Questions: Will smartphones replace plastic credit and debit cards
in the U.S.? What are the biggest hurdles to be overcome for this to happen?
Would the emergence of a new payment network bring the benefits that retailers
are looking for?
[Editor’s Note] The Bloomberg article pointed out that MasterCard
and Visa are not sitting idly by. The two companies are both working on projects
to enable payments on mobile devices.