One Day Soon Your Cell Phone May Replace Your Credit Card

What’s common in Europe and Asia may finally be coming to America: Waving your cell phone instead of swiping a credit card when you buy something.

The technology is already in the phone, so it’s “expected to take off in a big way,” claimed an Internet News story – from early 2007.

So what happened?

Unlike overseas, the United States has many more cell phone makers, mobile carriers, and credit-card companies. So it was with great fanfare last week that AT&T, Verizon, and T-Mobile announced they’d join forces to test just such a payment option in four U.S. cities.

The only city named so far is Atlanta, according to a Bloomberg report that calls the partnership a “game-changer.”

It works like this: Instead of taking out a credit card and swiping it through a reader, you’ll pull out your cell phone and wave it across a similar-looking device. An RFID chip embedded inside your phone will identify your account, and the charge will show up on your phone or credit card bill at the end of the month.

The technology isn’t the problem – the profits are. The hang-up is deciding on who gets what portion of the processing fees. The New York Times described it this way back in January 2009:

Cellphone manufacturers, carriers, financial institutions and retailers must all play roles. There also must be some sort of intermediary that is trusted by both the financial institutions and the carriers to activate the virtual credit cards inside the phone.

In fact, Nokia did a similar trial in 2006, starting in Irvine, Texas, and expanding to Atlanta, New York, and the San Francisco. While customers loved it, Nokia couldn’t negotiate the back-end deals. Apparently, AT&T, Verizon, and T-Mobile have hashed out those details, working with Discover Financial Services, maker of the Discover Card, to help with the process. No word on when those other three test cities will be announced. Stay tuned – or should we say, wait by the phone.