AT&T, Verizon look to phones as credit cards

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AT&T, Verizon and T-Mobile USA are thought to be planning to work with Discover Financial Services and Barclays to pilot contactless payments on mobile phones, bypassing Visa and MasterCard.

According to Bloomberg, the partnership will test a system, code-named Mercury, at stores, reportedly from mid 2011 in Atlanta, Austin, Texas, Minneapolis and Salt Lake City. In the meantime, the new payments unit is looking to recruit a CEO. The trial is being seen as the operators’ biggest effort to encourage m-payments in the US and a serious effort to replace the more than 1 billion debit and credit cards in American wallets.

The article comments that Visa and MasterCard handled $2.45 trillion, or 82% of American consumers’ spending on general purpose cards last year, according to the Nilson Report.

The move might prove popular with retailers, which have been complaining about and fighting against the transaction fees set by Visa and MasterCard for years. In July, merchants persuaded Congress to approve caps on interchange fees for debit transactions: interchange fees on credit and debit cards exceed $40 billion a year in the US, averaging between 1 and 2% of every transaction. A federal anti-trust suit filed in 2005 is still pending.

In addition, the US Department of Justice is weighing whether to bring a civil lawsuit against Visa for stopping merchants surcharging customers who use credit cards.

The Mercury pilot will, apparently, be similar to those already available in Japan, Turkey and the UK. Transactions would be processed through Discover’s payments network, the fourth biggest behind Visa, MasterCard and American Express. Barclays bank would help manage the accounts, anonymous sources told Bloomberg.

It is understood that AT&T and Verizon Wireless are equal partners in the venture and T-Mobile has a smaller stake. As of the end of the Q2 2010, Verizon Wireless serves 92.1 million subscribers, followed by AT&T at 90.1 million and T-Mobile USA at 33.6 million.

None of the companies concerned was prepared to comment.