Would you like to pay by cash, check or iPhone? Starting this fall, smartphone users will be able to use their handheld devices to pay for purchases at retail checkout counters across the country.
Eventually, that is. In a limited test running in New York City from September to the end of the calendar year, Bank of America (NYSE: BAC) and Visa (NYSE: V) will allow smartphone owners in the metropolitan area to create a “digital wallet” in their device and use it at specified retailers to make purchases.
Select individuals employed in New York will have a computer chip installed in their phones that emit radio waves with limited reach and, provided they have filled their digital wallet with funds, they will pass their phone over a device at the register to make their payment. The device will scan the user’s banking information automatically and they won’t need to sign a receipt as in a credit card transaction. Visa and their tech partners will provide the technology in both the chip and scanning devices. Visa will be running a similar program with US Bancorp (NYSE: USB) in October.
Like many mobile phone technologies to emerge in the United States as smartphones have proliferated over recent years, scanned smartphone payments for retail products, restaurant services, and other goods have been common in other countries for years. Japanese cellphone giant NTT DoCoMo (NYSE: DCM) began offering a digital wallet service along with the Sumitomo Financial Group similar to Bank of America and Visa’s program as far back as 2005. The DoCoMo program actually went a step further, allowing customers to use their phones as ATM cards as well as credit card proxies.
It comes as no surprise that Bank of America is making strides to control mobile payments in the United States. The bank is the largest payment processor in the world, second only to Global Payments Inc. (NYSE: GPN). With mobile phone service providers moving to control payments through smartphones independently, payment processing companies are in danger of losing control of a North American market that’s growing exponentially. AT&T (NYSE: T), Deutsche Telekom’s T-Mobile, and Verizon Wireless (NYSE: VZ) are working with Discover Financial Services (NYSE: DFS) on a new, as-of-yet unnamed joint venture to process mobile payments. Those mobile phone providers especially understand the importance of leveraging smartphone technology in the current mobile market.
In the second quarter of 2010, devices like the Google Inc. (NASDAQ: GOOG) Android-powered Motorola (NYSE: MOT) Droid, the Apple Inc (NASDAQ: AAPL) iPhone, and Research in Motion (NASDAQ: RIMM) line of BlackBerry phones accounted for 42% of all mobile phone sales. That number is only going to get bigger as both handsets and data plans become cheaper in the coming year.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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