AT&T, Verizon plan to take on credit cards
NEW YORK — AT&T Inc. and Verizon Wireless, the biggest US 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’s T-Mobile USA unit, may work with Discover Financial Services and Barclays PLC to test a system at stores in Atlanta and three other US cities that would let a consumer pay by waving a smartphone over a device, the people said.
The trial would be the carriers’ biggest effort to spur mobile payments in the United States and supplant more than 1 billion plastic cards in American wallets. Smartphones have encroached on tasks ranging from Web browsing to street navigation and now may help the phone companies compete with Visa and MasterCard, the world’s biggest payments networks.
“This is definitely a game-changer,’’ said Richard Crone, an industry consultant at Crone Consulting LLC, a company based in San Carlos, Calif. The firm advises card networks, issuers, and phone companies. The mobile carriers “are the biggest recurring billers in every market. They are experts at processing payments,’’ Crone said.
Visa and MasterCard handled $2.45 trillion, or 82 percent, of US consumer spending on general-purpose cards last year, according to the Nilson Report, an industry newsletter.
That dominance has helped fuel profit growth for both companies. Visa’s annual operating income has grown sixfold since fiscal 2005 to $3.54 billion last year. MasterCard’s has surged more than fivefold to $2.27 billion.
The service, similar to those already available in Japan, Turkey, and the United Kingdom, would use contactless technology to complete purchases in stores.
They would be processed through Discover’s payments network, currently the fourth-biggest behind Visa, MasterCard, and American Express Co.
Barclays would be the bank helping to manage the accounts, said the people, who requested anonymity because of confidentiality agreements.
AT&T and Verizon Wireless are equal partners in the venture, and T-Mobile has a smaller stake, one person said.
Representatives for the carriers, Barclays, and Discover declined to comment on the venture.
“Mobile payments are the logical next step for consumers,’’ said Mark Siegel, a spokesman for AT&T.
Siegel, Marquett Smith of Verizon Wireless, and Peter Dobrow of T-Mobile all said their companies “have nothing to announce.’’
At 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.’’
