AT&T, Verizon Hire Ex-GE Executive for Mobile Venture
AT&T Inc. and Verizon Wireless, the biggest U.S. mobile carriers, hired former General Electric Co. executive Michael J. Abbott to head a venture that would let people make purchases with their mobile phones.
Abbott, 43, was named chief executive officer of the New York-based mobile payments company that includes Deutsche Telekom AG unit T-Mobile USA as a partner, the carriers said today in a statement. He will help build a national payments network, called Isis, that will be available to all banks, merchants and wireless providers, the statement said.
“Our goal with this is to fundamentally transform the way that people shop, pay and save,” Abbott, previously chief marketing officer for GE’s retail consumer finance business in the U.S., said in an interview. “This provides 200 million phones and 200 million consumers.”
The phone companies are working with Riverwoods, Illinois- based Discover Financial Services and Barclays Plc to let consumers pay retailers with the contactless wave of a smartphone, potentially supplanting plastic credit and debit cards. That may pose a threat to Visa Inc., MasterCard Inc. and New York-based American Express Co., the biggest card networks, which have been testing mobile payments worldwide.
Payment Alternative
The service, similar to those already available in Japan, Turkey and the U.K., is expected to be introduced “in key geographic markets during the next 18 months,” the company said in the statement. People familiar with the plan said in August that the carriers were considering pilots in Minneapolis, Salt Lake City, Atlanta and Austin, Texas. Isis is the Egyptian goddess of simplicity, among other things.
“It’s a great alternative for consumers,” said Mark Siegel, a spokesman for Dallas-based AT&T, in an interview.
AT&T declined 1.4 percent to $28.24 at 4:15 p.m. in New York Stock Exchange composite trading. Verizon Communications Inc., which co-owns Verizon Wireless with Vodafone Group Plc, dropped 1.8 percent to $32.19. Discover fell 4.1 percent, the most since July, to $18.10. Visa slid 1.8 percent to $74.99 and MasterCard declined 4.1 percent to $233.06.
Transactions would be run through Discover’s network, currently the fourth-biggest by payments volume behind Visa, Purchase, New York-based MasterCard and American Express. Barclays, based in London, is expected to be the first issuer on the Isis network, the statement said.
Convergence
“Mobile payments are really where all the action is going to be and in the not too distant future, everything is going to converge,” said Diane Offereins, president of payment systems for Discover, in a telephone interview. “We want to make sure that your phone is your wallet.”
In 2002, Abbott joined Fairfield, Connecticut-based GE to build its strategy of issuing store-brand cards that can be used elsewhere because they carry the MasterCard, Visa, AmEx or Discover logos. GE, the biggest U.S. private-label card issuer, has portfolios including Wal-Mart Stores Inc. and Dillard’s Inc.
Abbott previously was senior vice president of card services at FleetBoston Financial, now owned by Bank of America Corp. Before that he was a researcher for International Business Machines Corp. and began his career analyzing electronic warfare intelligence data for Syracuse Research Corp. He has a master’s degree in electrical engineering and an MBA in finance and accounting from Columbia University, according to Isis’ website.
“With his knowledge and our great relationships with merchants, it’s a huge win-win,” Offereins said.
Radio Microchip
A consumer using the mobile service would be able to pay a retailer by holding a smartphone with an embedded radio microchip near a reader at checkout. The near-field communication technology, or NFC, may allow people to forgo plastic cards and enable retailers to send customers electronic receipts and rewards immediately.
“This network will provide greater value than simply a payment network,” said Abbott, who joined the venture on Nov. 1. “Just think of the cost and efficiency savings for the merchants.”
He declined to comment on how carriers will profit from transactions.
“This is where the market is moving,” said Amer Sajed, CEO of Barclaycard U.S., in an interview. “We’ll have tremendous access to scale with three of the largest telcos in the country.”
Apple and Google
Other companies including Apple Inc., the maker of iPhones, and Google Inc., operator of the world’s most-used Web search tool, also are working to develop mobile payments technologies.
Google’s next version of Android, its operating system for mobile devices, will be equipped for payments using near-field communication technology, CEO Eric Schmidt said yesterday during the annual Web 2.0 Summit in San Francisco.
Retailers may want to help another network after fighting for years to win lower transaction fees. Last month, Visa and MasterCard settled a U.S. antitrust lawsuit that said the companies’ contracts unfairly bar retailers from steering customers to other brands. Merchants filed a 2005 antitrust lawsuit that is still pending and earlier this year persuaded Congress to approve caps on fees for debit transactions.
Visa and MasterCard handled $2.45 trillion, or 82 percent, of U.S. consumer spending on all-purpose cards last year, according to the Nilson Report, an industry newsletter. That dominance has helped fuel profit growth for both firms. Visa’s annual operating income has grown almost eightfold since fiscal 2005 to $4.54 billion in the year ended Sept. 30. MasterCard’s surged more than fivefold to $2.27 billion in 2009.
To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net.
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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