Bank of America Corp., the biggest U.S. lender, will start testing a system next month that lets people pay New York-area merchants through mobile phones instead of swiping plastic credit or debit cards.
The service may be expanded if the test goes well, according to Michael Upton, senior vice president of emerging capabilities at Charlotte, North Carolina-based Bank of America. New York City taxis, Walgreen Co. drugstores, Home Depot Inc. and McDonald’s Corp. restaurants in the region can accept mobile payments, Upton said.
The goal is to “gain a better understanding about how customers perceive these types of services with new technologies that are changing people’s lives,” Upton said today in a telephone interview. Bank of America had 98.1 million payment cards outstanding in the U.S. at year-end, according to the Nilson Report, an industry newsletter, and counts 57 million relationships with consumers and small businesses.
Wireless carriers are seeking to enter the U.S. payments market dominated by San Francisco-based Visa Inc. and Purchase, New York-based MasterCard Inc., the world’s biggest card networks. AT&T Inc. and Verizon Wireless, the two largest U.S. mobile carriers, are leading a venture that may begin testing phone payments at stores in four cities by the middle of next year, people with knowledge of the plan have said.
Visa, MasterCard and New York-based American Express Co. are working to develop their own technology that works with mobile phones on the market now. Mobile payments are already in use in the U.K., Japan, Turkey and South Korea.
“Our customers carry cards today that are supported by the major payment networks, and the trial will support the major networks,” Upton said. Some details of the program were reported earlier by Reuters.
Other chains equipped to accept mobile payments in New York include Burger King Holdings Inc., CVS Caremark Corp. and BP Plc., according to Bank of America.
The pilot program would require microSD cards that can handle payments to be inserted into smartphones, Upton said. Visa and Richardson, Texas-based DeviceFidelity developed technology that can transform mobile phones, including Apple Inc.’s iPhone, into a digital e-wallet capable of storing multiple card accounts, said Bill Gajda, head of mobile for Visa, in a July 28 interview.
The mobile carriers’ trial, in contrast, would rely on chips embedded in handsets, people with direct knowledge of the plan have said.
The phone companies’ partnership, which includes Deutsche Telekom AG unit T-Mobile USA, may work with Discover Financial Services and London-based Barclays Plc to test a system at stores in Minneapolis, Atlanta, Salt Lake City and Austin, Texas, some of the people have said. Transactions would be processed through Discover’s payments network, currently the fourth-biggest behind Visa, MasterCard and AmEx. Barclays would the bank helping to manage the accounts, the people said.
The trial would be the carriers’ biggest effort to spur mobile payments in the U.S. and supplant more than 1 billion plastic cards in American wallets.
“The mobile carriers clearly are emerging as a player in the space,” Upton said. “We are in dialog with a number of the carriers just as we are with the networks and the other participants in the payments space.”