Okay, so the gas-powered car killed the horse and buggy as a mode of transportation (excluding the Amish). Video apparently killed the radio star. So what's next to go? According to a Bloomberg report, plastic credit and debit cards may be doomed by smartphones.
As it turns out, a number of wireless carriers, including AT&T, T-Mobile and Verizon, along with Discover Financial Services and Barclays, have formed a partnership and are testing a system in four U.S. cities that allows consumers to pay for purchases with a wave of their smartphones.
The service being tested is said to be similar to those already in place in Europe and Asia. Discover would process payments and Barclays would help with the management of accounts.
If successful, the test could be the beginning of real competition for MasterCard and Visa.
"What is a cell phone, except a mechanism for consumers to address their lives in whatever way they choose," Gary Townsend, CEO of the Hill-Townsend Capital hedge fund, told Bloomberg. "There's certainly no reason if an AT&T account can effectively be carried on a phone that a JPMorgan or a Wells Fargo card can't be there, too. In fact, the antitrust issues would demand that that be allowed."
Retailers, many of which have been engaged in a rancorous dispute with the major credit card companies over interchange fees, are generally supportive of any alternatives that make the payment market more competitive.
"The emergence of a secure and reliable competing network that serves the demand from consumers for mobility payment options and reduces retailers' costs would be welcomed news," Brian Dodge, a spokesperson for the Retail Industry Leaders Association, told Bloomberg.
Discussion Questions: Will smartphones replace plastic credit and debit cards in the U.S.? What are the biggest hurdles to be overcome for this to happen? Would the emergence of a new payment network bring the benefits that retailers are looking for?
[Editor's Note] The Bloomberg article pointed out that MasterCard and Visa are not sitting idly by. The two companies are both working on projects to enable payments on mobile devices.