Carriers Conspire Against Credit Cards to Rule Mobile Payments

The promise of mobile payments and Near Field Communications has been lurking and inchoate in the US for years. There's much greater deployment in Europe and Asia than in the US. However Bloomberg reports that mobile carriers AT&T and Verizon are "conspiring" with several others -- Discovery would be the payment processor -- to outflank Visa and MasterCard and rule the now-inevitable world of mobile payments:

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. The carriers have been searching for a chief executive officer.

The trial would be the carriers’ biggest effort to spur mobile payments in the U.S. 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 San Francisco-based Visa and MasterCard, the world’s biggest payments networks.

One of the key issues in the hypothetical adoption of such carrier-based payment systems is: whom do consumers trust more: their credit card companies or mobile phone carriers? It's a bit of a tossup. Neither are well-loved by consumers. Yet genuine mobile payments competition from mobile carriers might be a great thing and create a better environment for consumers where carriers and credit card issuers boost rewards and loyalty programs as incentives to use their systems. 

It very much remains to be seen whether this still nascent carrier effort can get off the ground. While consumers are used to seeing large credit card bills it's not clear they would be happy with massive bills from their wireless carriers. However this is one area where carriers can re-insert themselves into the consumer experience, as they're increasingly marginalized otherwise by the proliferation of smartphones.