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Bloomberg reports that “AT&T Inc. and Verizon Wireless, the biggest U.S. mobile carriers, are planning a venture to displace credit and debit cards with smartphones, posing a new threat to Visa Inc. and MasterCard Inc., three people with direct knowledge of the plan said.”

The system, once in place, “would let a consumer pay with the contactless wave of a smartphone, the people said ... The trial would be the carriers' biggest effort to spur mobile payments in the U.S. and supplant more than 1 billion plastic cards in American wallets. Smartphones have encroached on tasks ranging from Web browsing to street navigation and now may help the phone companies compete with San Francisco-based Visa and MasterCard, the world's biggest payments networks.”

According to the story, “Retailers may be eager to help another network after years of fighting over transaction fees set by Visa and MasterCard. The merchants pressed Congress last month to approve caps on interchange, or ‘swipe’ fees, for debit transactions and filed a 2005 federal antitrust lawsuit that is still pending. The U.S. Department of Justice is weighing whether to bring a civil lawsuit against Visa, the company said last week.

“Interchange fees on credit and debit cards exceed $40 billion a year and average about 1 percent to 2 percent of every transaction. The people with knowledge of the carriers' venture didn't say how much merchants may be charged per transaction or when the trial will start.”
KC's View:
Not only will merchants embrace an alternative to credit cards, but I suspect that shoppers - who are carrying their smartphones around with them anyway - will love having the ability to leave the cards at home. There obviously will have to be ample security measures built in...but this strikes me as a no-brainer.