Carriers Explore Mobile Payments @ Possible Expense of Banks, CUs Posted by AVCU on 11:00 AM

American Banker reports that AT&T, Verizon and T-Mobile are working together to develop a new payments system, in conjunction with Discover Financial Services and Barclays. The consortium plans to test the system in Atlanta and three other U.S. cities.

The article reports that banks and wireless carriers have collaborated in the past on mobile payments trials, but that this current effort appears to go further. In the past, an issuer and carrier would team up to offer consumers phones featuring near-field communication chips (NFC) — the same chips used in contact-less payment cards. These phones were used to make purchases charged to users' existing card accounts.

This new effort, however, although also likely based on NFC, could involve different payment accounts where the carriers, not banks, would administer the accounts. Funds could be stored by the carriers at Barclays because the wireless phone companies aren't interested in becoming depository institutions. The actual transactions could move across the Discover network.

The lack of NFC chips in current phones has been one of the major barriers for banks wanting to offer mobile payment services. By installing NFC chips in their phones, carriers could also open the door to other companies that would like to use the same capabilities. However, carriers could make it very difficult for banks to capitalize on the NFC features. AT&T, for example, uses a format called the single wire protocol that enables it to sequester a user's financial data within a phone's SIM card.

Read the entire article here.