At&T and Verizon to Team up for Mobile Payments

According to recent news from Bloomberg, "AT&T Inc. and Verizon Wireless, the biggest U.S. mobile carriers, are planning a venture to displace credit and debit cards with smartphones, posing a new threat to Visa Inc. and MasterCard Inc., three people with direct knowledge of the plan said. The partnership, which also includes Deutsche Telekom AG unit T-Mobile USA, may work with Discover Financial Services and Barclays Plc to test a system at stores in Atlanta and three other U.S. cities that would let a consumer pay with the contactless wave of a smartphone, the people said. "

This is the biggest effort till date by large carriers to challenge the likes of Visa and Mastercard who dominate the POS payments by consumers.The move comes as retailers continue a bitter battle against Visa and MasterCard over transaction fees on credit and debit cards. Congress last month passed restrictions on fees charged to retailers on debit transactions as part of its sweeping financial reform overhauls.

The service, similar to those already available in Japan, Turkey and the U.K., would use contactless technology to complete purchases in stores. They’d be processed through Discover’s payments network, currently the fourth-biggest behind Visa, MasterCard and American Express Co. Barclays is likely the bank which will manage the payment accounts and settlement.

Details are still not clear and it remains to be seen if such an alliance can really take off. Historically, such alliances have seldom been successful and it remains to be seen if consumers and retailers embrance another payment option. It will also be interesting to see how Visa and Mastercard react to it. Both companies have been separately testing their own versions of the NFC payments at POS terminals.

Personally I remain skeptical about the initiative but it will certainly be a game changer in the US if it takes off.
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