As credit card crime rises in Australia local Smartphone carriers are watching with interest the trialling of a project in the USA that will see the humble credit card replaced with a Smartphone.
Telstra executives claim that they are aware of the trial to develop a mobile payment system that works with smartphones. The concept, if successful, will hurt Visa and MasterCard.
In the USA three carriers have combined to work together AT&T (T), Verizon Wireless, and T-Mobile.
The partners aim to test the system in three US cities. Certain stores will be set up to accept a smartphone swipe as opposed to a card swipe. The benefit to the carriers, if the trial is successful, is that they get the percentage revenue from any transactions as opposed to Visa and MasterCard.
BusinessWeek said: “This is definitely a game changer,” says industry consultant Richard K. Crone. Mobile carriers “are the biggest recurring billers in every market. They are experts at processing payments”.
A Telstra executive said: “We are aware of the trial. It is interesting and one that could be adopted in Australia if it works in the USA”.
How the system works is simple. A customer making a purchase will hold their smartphone in front of an electronic reader in a store as opposed to handing over a credit card.
The transactions are processed by the same gateway companies that have supplied services in the past to Visa and MasterCard.
BusinessWeek said that retailers may be eager to support a rival network after years of tussling with Visa and MasterCard over transaction fees. “We have long argued that real competition is missing from today’s payments market,” says Brian Dodge of the US Retail Industry Leaders Assn.
If the system is adopted in Australia merchants would have to spend an estimated $200 per electronic reader, and updating mobile phones with embedded microchips would increase manufacturing costs by $10 to $15 per handset, according to the US analysts.
That may be worth the money if accepting mobile payments allows retailers to send rewards and information about promotions to their customers’ phones at checkout.
