According to Bloomberg, AT&T and Verizon are planning a venture to accelerate the pipe dream of turning our smartphones into e-wallets. How big is this? H-U-G-E!
First, if it's enough to get 2 arch rivals together at the same table (putting aside their red and blue coverage maps), it's serious.
Second, the stock price of both Visa and Mastercard, who control 82% of credit card transactions, took a 1.5-3.5% hit today on this news because they are on the losing end of such a venture.
Third, smartphone adoption is growing like gang busters. iPhone 4s are selling like hotcakes despite its antenna issue. Every hot new Android phone (e.g., Droid Incredible, Evo, Droid X) is on back-order soon after launch. Research firm Canalys predicts smartphone adoption will reach 48% by 2013 in the US.
Fourth, consumers are getting used to mobile banking. According to Mercatus, more than half of U.S. consumers will use mobile financial services within five years.
To be sure, this is no slam dunk. Visa and Mastercard and the plastic card status quo is not easy to supplant. They have distribution systems and merchant relationships in place. Merchants would have to get new readers and handset OEMs would need to embed new chips.
The catch-22 is they may not want to make that kind of investment until consumers show real interest in using it. But that only comes when consumers find enough merchants who accept such payment methods.
Now this is a BIG deal because I saw the same thing happen 10 years ago when smart cards had the potential to take the US by storm and it never really did. I just hope history does not repeat itself.
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