Navigator. News source. Meal planner. Camera. Meteorologist. Smartphones can be customized to do almost anything except vacuum the floor and pay for purchases. While smartphones may never replace your vacuum cleaner, they may one day take the place of your credit card.
The United States is one of the few remaining developed countries that still uses magnetic strip credit cards. Many countries haves witched to contactless payment systems with advanced technology. In the U.S., banks and retailers have not rushed into contactless payment systems because the changes are expensive. Each reader costs approximately $200 and the expense adds up quickly for retailers.
While banks are taking their time to advance beyond the magnetic strip, other companies are eager to compete with Visa (V) (Stock Quote: V) and MasterCard (MA) (Stock Quote: MA). Those two companies handled 82%, or $2.45 trillion, of the consumer spending on general purpose cards last year in the United States, according to the Nilson Report.
(V) (MA) AT&T (T) (Stock Quote: T), Verizon (VZ) (Stock Quote: VZ), T-Mobile, and Discover Financial Services (DFS) (Stock Quote: DFS) are joining together to create a processing system that allows consumers to wave their smartphones at cashier readers to make a payment. Discover will process the payment. Bloomberg News reported they will test the technology at stores in Atlanta and three other cities. There is no publicized timeline.
Once the technology is available, consumers will likely pay more to add a wireless chip or upgrade their smartphones with secure payment capabilities. According to the Federal Reserve Bank of Boston, updating mobile phones with embedded microchips would increase manufacturing costs by $10 to $15 a handset.