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Pay with your phone

Your cell phone may replace your plastic credit and debit cards.

TEXT OF INTERVIEW

Kai Ryssdal: There's a market research firm out there called Nilson. Not Nielsen, the television ratings people. It's Nilson, they cover the payment industry -- how people pay for what they buy. A statistic from them I read the other day says between 'em, Visa and Mastercard handled 82 percent of credit-card-based consumer spending every year. Which means if you can make a dent in that number, take away some of the action, there's a ton of money to be made. And it may well be cell phone companies that do it.

Marketplace's Steve Henn's here to explain. Hey Steve.

Steve Henn: Hey. How are you?

Ryssdal: I'm alright. So this new system, how might it work?

Henn: Well, it probably would be pretty simple. You know, you could just wave your cell phone next to a reader at the check-out line that's hooked up to your credit card, and voila, you've paid. Systems like this have been around for years -- I think six years in Japan and for a while in Europe -- so the problem hasn't been a technological one here in the United States. The problem's been getting a bunch of different companies to cooperate. You had to get credit card companies online, different cell phone providers online and then the retailers to agree to this too, and then possibly deploy some new equipment, lots of new equipment in their stores around the country. So, the big news today is that the three biggest cell phone companies -- AT&T, Verizon and T-Mobile -- have reportedly agreed to work together with Discover card and put something in place.

Ryssdal: What about the retailers, though, right? You need that other leg of the three-legged stool.

Henn: Yeah, and that's important. And retailers will have to spend potentially billions of dollars to put new readers in stores all across the country. But Brian Dodge at the Retail Industry Leaders Association says, store owners are pretty tired of paying huge fees to credit card companies, specifically MasterCard and Visa, for processing their transactions.

Brian Dodge: Last year, retailers paid in excess of $48 billion in what are called "interchange fees," and these are the fees that are paid every time that a consumer swipes his or her card in their stories.

Henn: The other thing that's interesting is that AT&T and Verizon also pay these fees whenever their customers pay their cell phone bills with their credit cards. So, that's one more reason for them to jump in on this market and introduce competition. And the cell phone companies could also make some money where credit card companies can't. You know, if you think about it, your cell phone's always in your pocket. If they know that you have a weakness for tech gadgets, and they know you're walking by the Apple store, they can send you a discount or a message or an ad for that iPad that you've been thinking about.

Ryssdal: But I don't want to be marketed to like that. I mean, that's the thing that people are going to say, right? "I just want to use this as a convenience without giving up any of my privacy."

Henn: Yeah, it's kind of creepy. But marketers are desperate to slip into your pocket with your cell phone, and you know, I think they're going to try everything conceivably possible to get in there.

Ryssdal: One last thing about privacy and cell phones: This news out of the UAE about Blackberry being shut off over in the United Arab Emirates, and maybe in Saudi Arabia too. What do you make of that?

Henn: Well, I think it's another example of how powerful cell phones are, especially smart phones. They control and collect your location, your conversations, your e-mails, you texts, and potentially, a lot of information about your spending habits soon too. And just like marketers, governments are going to want to get at that and pay attention to it, especially if they're worried about terrorism or controlling the information that their population gets to see and consume.

Ryssdal: Steve Henn, up in Silicon Valley for us. Thanks Steve.

Henn: Sure thing.

Log in to post4 Comments

ANY system that decreases or cuts out the interchange fees would be fabulous. My company processes 10s of millions in bill payments a year on a cash basis only. We make our money by cents on the dollar and if we could bypass interchange fees, we'd feel justified in investing in hardware & software to make it happen.

I can see this being a lot simpler done on the Android platform. Google runs Android and Google Checkout, which already processes online payments.

You couldn't give me a free iPhone and service.

see my comment on the credit card story link.

On which bill do you find more errors:
a) Credit Card
b) Cell Phone

Although it's hard to find people who love their Credit Card Company I think it'll be even harder to find people who like their cell phone service provider (AT&T not Apple).

Interesting how people love Apple, but AT&T...not so much.

While I look forward to improved payments, paying via a cell phone company will require yet another reinvention of the phone company.

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