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Visa, Discover and major banks begin testing mobile phone payments
A who's who of bankers, payment networks and telecom carriers have joined in seperate projects to pilot mobile payments in New York and Atlanta.
September 16, 2010
The major payment networks and several telecom giants joined with some of the largest banks in the country recently to test payments through mobile phones in a number of pilot projects. Kiosk industry experts have predicted a consumer switch to mobile could impact such successful kiosk applications as DVD-rental kiosks, airport self-check-in, retail self-service and other uses.
The bankers and payment networks include such giants as Bank of America, Visa, U.S. Bank and Wells Fargo.
Earlier this summer telecoms AT&T Inc., Verizon Wireless and T-Mobile USA, a division of Deutsche Telekom AG, joined to pilot a contactless smart phone payment system at stores in Atlanta and three other U.S. cities, according to a report in Bloomberg.
Discover Financial Services and Barclays plc are the bankers and networks involved with the Atlanta test, Bloomberg reported.
In a separate pilot that began this week, BofA, U.S. Bank, Visa and Wells Fargo teamed on a smart phone payment project in New York City, with plans to complete the trial by the end of the year, according to a BofA spokesperson.
An undetermined number of participants will use either their BlackBerry mobile phones or their Apple iPhones to pay for purchases at merchants who accept contactless payments, says the spokesperson.
"We want to be commercially ready early in 2011" to let consumers use their cell phones to make purchases in stores, Bill Gadja, Visa's head of global mobile products, told the Reuters wire service.
There are 140,000 contactless payment terminals in the United States out of 4 million to 5 million payment terminals overall, says Aaron McPherson, research director for payments at Financial Insights, which is based in Framingham, Mass.
"Contactless payment terminals, however, are located in high-traffic areas, such as Target [stores], so their impact is very high," McPherson said. McDonald's Corp.; Duane Reade, the New York-based drugstore chain; BP (British Petroleum), the gasoline retailer; and some New York City taxis accept contactless payments.
In the New York pilot, participants must install a SanDisk Corp. memory card inside their cell phone. They also must download an application that turns their smart phones into mobile wallets.
Milpitas, Calif.-based SanDisk manufactures flash memory cards installed in mobile phones that are used to transfer data between electronic devices. A second SanDisk card would enable Near Field Communication (NFC), allowing participating cell phone users to pay for purchases by swiping their cell phone in front of a contactless payment terminal, McPherson says. The smart phone would be connected to the owner's debit or credit card account, he says.
"A smart phone owner must hold the phone within four inches of the contactless terminal to complete a payment transaction," the BofA spokesperson said.
The BofA pilot will support all of the major payment networks — Visa, MasterCard, American Express and Discover.
The pilot also could enhance Bank of America's mobile banking platform, which the financial institution introduced in 2007. The bank has more than 5 million mobile banking customers.
If the pilot proves successful and if it is rolled out to consumers, it could enhance customer loyalty, McPherson says. "Retailers could place rewards on customers' cell phones, and they could redeem them at the point of sale or pay [for purchases] with points. It would be a great convenience," he said.
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