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Cell Phones vs. Credit Cards: The Battle Begins


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June 28, 2005

Cell Phones vs. Credit Cards: The Battle Begins

Olga Kharif

I wonder if credit card companies and banks could soon be in for a nasty surprise. For the past several years, European wireless service providers have allowed subscribers to charge vending machine purchases onto the users' mobile phone bills. Now, U.S. service providers are starting to follow suit. For instance, users of mobile short-text messaging service SMS.ac can now add charitable contributions to their wireless bills.

Subscribers simply need to send a short-text message to a 5-digit short code to donate 25 cents a day for 31 days. That donation will appear on their monthly wireless bill.

Here's my thinking: If wireless service providers continue to roll out such billing services, they could, eventually, grab a chunk of revenues away from credit card companies and banks.

Lots of analysts believe that cell phones will soon turn into our virtual wallets. We'll be able to use them to pay for purchases everywhere: at stores, restaurants, amusement parks. Perhaps we'll even consolidate our gas and water charges onto our wireless bill.

If that happens, banks and credit card companies will loose out on the fees they currently charge for facilitating financial transations. Today, every time you pay a merchant with your credit card, that seller has to, in turn, pay Visa or MasterCard 1% to 2% of the purchase price.

Perhaps in the future, they will pay that fee to wireless service providers, instead. Such a set-up might especially appeal to young people, who seem to never part with their mobile phones. Also, some estimated 10 million to 20 million U.S. households without bank accounts -- but with cell phones -- might jump at the chance to use the wireless micropayments service.

In fact, I think it's quite possible that cell phone companies could, eventually, become banks, keeping customer money, helping users pay bills and to pay for purchases. Check out this story, describing the various financial transactions that wireless service providers already enable in other parts of the world.

In all likelihood, we'll soon be able to do the same things here, in the U.S. And that could shake the credit card and banking industries to the core.

12:48 PM

wireless

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Olga Kharif envisions a future where we'll be able to use our cell phone to "pay for purchases everywhere: at stores, restaurants, amusement parks. Perhaps we'll even consolidate our gas and water charges onto our wireless bill."... [Read More]

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? phones and Cell Phones vs. Credit Cards: The Battle Begins from

Small Businesses Offer Big Help to Katrina Relief Efforts - On their back, their wallets and their cell phones, said compact power systems director of marketing, rodney . ago, which means the cell phones probably have run out of batteries. [Read More]

Tracked on September 9, 2005 06:02 AM

? phones and Cell Phones vs. Credit Cards: The Battle Begins from

Small Businesses Offer Big Help to Katrina Relief Efforts - On their back, their wallets and their cell phones, said compact power systems director of marketing, rodney . ago, which means the cell phones probably have run out of batteries. [Read More]

Tracked on September 9, 2005 07:33 AM

I totally agree with the threat. Some years ago, I tryed to discuss this with Telecom industry people, actually trying to seduce them into starting a similar business venture.

I was shut up with the usual regulatory difficulties and risks (security mainly). But business sense allways prevails. The idea makes sense, is a very appealing use for something you already carry anyway, and the initial complaints or restrictions regarding security and privacy will be (as usual) answered in due time, as business grows.

let's wait and see.

Posted by: Ricardo Pessoa at June 29, 2005 12:26 AM

I think it is an idea whose time has come. I am not too aware of the US markets , but in India/China this definitely looks like something looming large on the horizon. Today the cell phone companies have all the infrastrucutre in place to run credit card operations - in terms of database, sales network, billing infrastructure, expertise in validating customer details, credit checks, etc.

Also, the largest CDMA service provider in India, Reliance Infocomm, is part of the Reliance group, which is soon going to launch banking and financial services (Reliance Capital). Tata Teleservices, which is the other player, is part of the Tata group, which is looking for a foray into banking services.

Posted by: Vishal Mehta at June 29, 2005 04:49 AM

Different feauters offered in sprint cell phones plans are as follows:

there are various options to send and to receive messages with special option known as SMS Voice

Messaging, and also for text messages.

Posted by: sprint at February 3, 2006 11:53 PM

About this vitual wallet with your mobile phone has any country already implemented it. China and india are both of them already using this technology.

Posted by: Smith Oshodin at February 26, 2006 06:22 PM


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