If you think your smartphone is cool now, just wait until you can start buying groceries with it.
That time may come sooner than you think.
A super-secret alliance of wireless carriers, including AT&T and Verizon Wireless, are teaming up with banking giant Barclays and the payment network of Discover Financial Services to allow consumers to start buying stuff with a “contactless” swipe of their iPhone, BlackBerry or other smartphone.
The alliance, which was first reported by Bloomberg News yesterday and was confirmed by three people with direct knowledge of the plan, will kick off soon with a pilot program at retailers in four selected cities, including Atlanta.
It takes dead aim at Visa and MasterCard and the 1 billion credit and debit cards now in the wallets of US consumers. News of the futuristic “contactless” payment method sent shares of the two biggest brands of charge and debit cards reeling.
MasterCard shares dropped 3.7 percent in the first 45 minutes of trading before closing at $202.52, down $7.52, or 3.6 percent. Shares of Visa dropped 3.2 percent by 10:15 a.m. — as the marts were up strong — before recovering and finishing down just 1.5 percent at $72.23.
“This is definitely a game-changer,” Richard Crone, of Crone Consulting, in San Carloe, Calif., told Bloomberg.
The alliance, which also includes wireless carrier T-Mobile, is the biggest effort to date by the wireless carriers to spur mobile payments, according to the report. Smartphones have already begun to take on Web browsing and street navigation, Bloomberg reports, but are now turning their focus to larger prey.
Discover, the fourth-largest credit card processor behind Visa, MasterCard and American Express, saw its shares jump on the news, rising nearly 3 percent to a morning high of $15.77.
The move comes as retailers continue a bitter battle against Visa and MasterCard over transaction fees on credit and debit cards. Congress last month passed restrictions on fees charged to retailers on debit transactions as part of its sweeping financial reform overhauls.
“This is indicative of a trend. American consumers are increasingly walking around with a smartphones in their pockets and this affords them a new opportunity to use them,” said Brian Dodge, a spokesman with the Retail Industry Leaders Association.
“But let’s not for a moment be naive and think Visa and MasterCard aren’t looking for some kind of technology to let them maintain their dominant position in the marketplace,” he said.
Indeed, MasterCard and Citigroup in June launched a sticker to be attached to the backs of phones to allow for swipe payments.
The new buy-by-smartphone process probably won’t replace JPMorgan Chase, Wells Fargo and other large issuers of plastic, according to the report. They will likely be there alongside the alliance members.
The parties involved in the Discovery alliance declined to comment.
“We’re always developing new, exciting and convenient features to offer our customers, and mobile payment has flourished in other areas around the globe. But we have nothing to announce at this time,” Patty Raz, a spokeswoman for T-Mobile said.