Our Smartphone as our Credit Card?

Finally, our carriers have decided to join the 21st century to get on with the over due project that has been going on in the Europe and many of the Asian countries for the past three years. According to Bloomberg AT&T Mobility, Verizon Wireless and T-Mobile are all working on a smart-phone payment system using Near Field Communications (NFC) that would displace credit and debit cards.

The carriers would keep Visa, MasterCard and American Express out of the mix to work with Discover, the second-tier player for the payments network that processes all of the transactions. Barclays is lined up to manage the accounts, according to Bloomberg, which cited three anonymous sources for the story.

It sounds like  the carrier’s partnership with Discover suggests that they are lining up against the major three credit card companies – mainly because of the fact Visa, MasterCard and American Express have their own plans for mobile payments.


Although the carriers might be incredibly strong and adept at recurring billing, I have very little doubt the three credit card companies are going to sit quietly, especially not when they controlled a combined 82% of U.S. consumer spending on general-purpose cards last year.

Just two month ago, Citigroup introduced MasterCard PayPass stickers that, when affixed to a mobile device, could process payments at the 230,000 merchants that already support MasterCard’s solution.

Visa is also already working with NFC technology, including partnering with privately held DeviceFidelity to integrate NFC chips into memory cards, which would be distributed to Visa customers.

American Express Co. recently hired Sprint Nextel’s prepaid chief, Dan Schulman, to expand its mobile payment options.

Anyway, I’m excited to see all of the new payment methods that are coming out. Hopefully, competition will drive down the fees the payment processors charge.

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About Elias Shams
I have been a serial entrepreneur in telecom and social media space for past 12 years or so. I hold a M.S. degree in Telecommunication Engineering from the George Washington University and a B.S. degree in Electrical Engineering from the University of Maryland. I’ve lived and worked in many countries and cities including London England, Tehran Iran, Bonn Germany, Paris France, Alicante Spain, Delhi India, and my favorite of all Washington, DC of great US of A. Two of the greatest Washington, DC based companies I worked for and very proud of are Yurie Systems which was sold to Lucent in 1998 for $1.23 B and telezoo.com that I founded in 1999. I am currently the founder and awesomizer @ awesomize.me

3 Responses to Our Smartphone as our Credit Card?

  1. Mike Watson says:

    Nice article. I only have one major disagreement. You can’t displace credit or debit cards. There are over a billion in the US alone and more than 12 million POS terminals at retailers (not controlled by operators). But let’s really analyze what the operators are doing, both good and bad. The good is that 3 operators are collborating on mobile payment and making a decision to use NFC (obvious). Collaboration is the only way that proximity based mobile payment will take off as this is proven in both Europe and Asia. Integrating NFC into (not onto) is also critical. Stickers are a nice transition concept, but I can’t imagine a long term solution where multiple stickers are plastered onto a phone like it’s a traveling guitar case. Remember fobs? However, the bad news is that the carriers don’t seem to be working with the major associations (i.e. Visa, MC, AMEX), payment processors (i.e. First Data), and therefore retailers (i.e. Walmart, BestBuy, McDonalds, etc…) directly. There’s probably much more behind the Discover trial than any of us know, but on the surface it appears to be a nice step forward, but one that continues to try to keep a part of the carrier wall alive. I can’t imagine consumers making all payments with a Discover card. I can’t imagine retailers being levered into Discover because of mobile payment alone. And I can’t imagine that issuing/acquiring banks or card associations will just sit on idle and let carriers try to take over their world. Until carriers realize that they are an enabler, not the solution, mobile payment will not take off. The key is to work collaboratively with all parts of the existing ecosystem and create a business model that generates a reasonable return for the cost to add NFC to a phone; nothing more, nothing less,

  2. Mike Watson says:

    I’m not completely sure what you are asking? Are you asking why Discover is lagging behind the other 3 in general or specifically in mobile? In general, it’s almost impossible to start a new association. Discover is the youngest and doesn’t have the reach of the others. Generating reach means getting critical mass of consumers, banks and retailers. Multiple chickens and eggs. Consumers won’t buy into Discover unless their banks offer it, they are useable in almost every retail location and/or they have some valuable, differentiated offering from the other card associations. Retailers don’t want to support them unless they have enough consumers and offer some sort of value to support the cards. Banks have no real need for supporting Discover unless they offer a better return than other cards or unless consumers demand support for Discover (they don’t). Discover has bouced around a bit (Sears, Dean Witter, Morgan Stanley, now independent), so it’s probably been hard to have a long-term strategy and focus. I don’t reallly know, but I do understand why this trial is important to them. If they can get to the point of leading in mobile with the carriers, they probably believe that it will spur growth that they can’t get otherwise by simply sending out mailers to consumers or pounding the pavement to get retail support.

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