ATandT, Verizon to Take On MasterCard, Visa

Mobile carriers AT&T and Verizon, along with T-Mobile, are reportedly working on a "contactless" solution that will let consumers pay for purchases via a touch of their smartphones.

AT&T, Verizon Wireless and T-Mobile are planning to challenge Visa and MasterCard as the newest facilitators of quick-shopping dollars.

The carriers-AT&T and Verizon most dominantly, with Deutsche Telekom's T-Mobile in a supporting role-are planning to pilot a program that will allow consumers to pay for items using "contactless" technology on their mobile phones, Bloomberg reported Aug. 1, citing "three people with direct knowledge of the plan."

The pilot will reportedly kick off in Atlanta, before launching in three other U.S. cities. The carriers, which are the "biggest recurring billers in every market," according to consultant Richard Crone in Bloomberg, are going after the $2.45 trillion market that Visa and MasterCard reportedly enjoyed in 2009.

Similar programs are currently popular in Japan, Turkey and the United Kingdom. In the United States, the program will be handled, with a bit of help from Barclays, by Discover's payments network-the fourth largest behind Visa, MasterCard and American Express, according to Bloomberg.

The time may be right for contactless payments, as U.S. consumers increasingly turn to their mobile phones for purposes well beyond placing calls. In addition to Web surfing, e-mailing and turn-by-turn directions, mobile banking rates continue to rise-worldwide, Juniper Research expects 400 million people to subscribe to the service by 2013-as do services such as mobile ticketing. In a July report, Juniper forecast mobile ticketing transactions-whether for travel or sporting events-to exceed $100 billion, more than doubling the 2010 market.

"I think it's a very natural next step for mobile service providers to get into this," Charles King, principal analyst with Pund-IT Research, told eWEEK. "They have the funding and the type of financial resources available that they can create a transaction system that would probably rival Visa's."

Plus, said King, consumers in their teens, 20s and even 30s are so used to using their phones for a variety of services that "using their phone as a payment mechanism would probably be very natural for them."

Bloomberg reports that Visa is currently in talks with a number of mobile operators to partner on a contactless phone solution. While King said he isn't surprised that Visa or MasterCard wouldn't simply step aside and let other institutions come between them and their customers, it's not so clear that an AT&T or Verizon would necessarily find it worthwhile to "give up a piece of their pie," in exchange for the card companies' expertise.

As for the timing of the pilot, "you want to get the system up and going and get the bugs worked out before the biggest retail season of the year," he said. Launching within the next 60 to 120 days, he said, would give the carriers the time they need to work things out, while also creating "significant revenues for this year."