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System aims directly for Visa and MasterCard

There are four major wireless carriers in the U.S. today: Sprint, T-Mobile, Verizon, and AT&T. The four carriers battle fiercely to land exclusive handsets and customers in the mobile market. Getting three of those four major carriers to work together on one plan seems unlikely.

The only thing that could drive AT&T, Verizon, and T-Mobile to work together is money – the three carriers are reportedly working together on a new system that could replace credit cards with payments using a smartphone.
Bloomberg reports that the carriers are working on the idea for a system that could rival MasterCard and Visa.

Payments on the system according to 
Bloomberg sources close to the deal would be made through Discover and Barclays, two of the four major credit card payment-processing firms. Credit cards are a huge business with MasterCard alone handling $2.45 trillion of credit card spending last year.

The system will be trialed at test stores in Atlanta, Georgia and stores in three other cities in America. The system would allow the user to pay for purchases at the register using a contactless system on their smartphones.

Analyst Richard Crone of Crone consulting LLC said, "This is definitely a game-changer." He continued saying, "[Wireless carriers] are the biggest recurring billers in every market. They are experts at processing payments."

There are similar services already in use in other countries with payments being processed using smartphones in Japan, Turkey, and in the UK. AT&T and Verizon are reportedly equal partners in the venture with T-Mobile having a smaller stake. Retailers are welcoming of a new processing system in hopes that the fees on purchased made using the system will be less than the 1% to 2% that credit card firms typically charge on each transaction today.

However, none of the sources that
Bloomberg cites were able to give an indication of how much the processing fees would be or when the trials of the new payment system would start in test cities. Fees on credit and debit card purchases are a $40 billion per year industry.





"We are going to continue to work with them to make sure they understand the reality of the Internet.  A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis




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