AT&T (NYSE: T), T-Mobile USA, Verizon Wireless (NYSE: VZQ) are planning a venture to compete with Visa (NYSE: V) and MasterCard (NYSE: MA)’s credit card business by developing a mobile payment system based on smartphones, reported Bloomberg.
The trio of cell-phone providers may work with Discover Financial Services (NYSE: DFS) and Barclay’s PLC to trial a system of stores in Atlanta and at least three other U.S. cities which would allow a consumer to pay with a contactless wave of a smart-phone, said the report citing anonymous sources. The three companies have also been working together to reportedly find a CEO for the joint venture. The trial would market the largest single effort of carriers to push forward mobile payments in the United States, hoping to supplant the more than $1 billion plastic cards in American wallets.
Visa and MasterCard handled $2.45 trillion worth of U.S. consumer spending on general purpose credit cards last year, reported Bloomberg citing a report from the Nilson Report, an industry newsletter. The 82% market-share that Visa and MasterCard have over payment processing has resulted in a 600% increase in Visa’s earnings since 2005 to a total of $3.54 billion in 2009. MasterCard has seen more than 500% growth since 2005, resulting in $2.27 billion in operating income in 2009.
The joint venture aims to replicate mobile payments systems which are already available in the U.K. Japan and Turkey, which makes use of contactless technology to complete purchases in stores. The payments would be processed through Discover’s network, which is currently the fourth largest behind, Visa, MasterCard and American Express. Barclays would serve as the bank helping manage the accounts, the report said.
Discover spokeswoman Leslie Sutton said the company “is always evaluating technology solutions that make things faster, safer and more convenient.” Barclays spokesman Kevin Sullivan said “facilitating mobile payments is a big part of Barclaycard’s strategy globally.
