Verizon, AT&T’s Mobile-Payments Venture Said to Name Abbott CEO
Verizon Wireless and AT&T Inc., the biggest U.S. mobile carriers, hired former General Electric Co. executive Michael J. Abbott to lead a venture that will let people pay for purchases using their mobile phones, according to a person with direct knowledge of the matter.
Abbott, previously chief marketing officer for GE’s U.S. retail consumer-finance business, will be announced as chief executive officer of the new mobile payments company, which also includes Deutsche Telekom AG unit T-Mobile USA as a partner, said the person, who asked not to be identified because the plans aren’t yet public. An announcement may be made today.
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.
Abbott’s hiring “should definitely cause MasterCard and Visa to take this initiative very seriously,” said Philip Philliou, at payments-industry consulting firm Philliou Selwanes Partners in New York. “You have someone who understands consumer payments, as opposed to this being someone from the telecom industry.”
The service is similar to those already available in Japan, the U.K. and Turkey. 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, may be the bank helping to manage the accounts, people familiar with the plans said in August.
Attempts to reach Abbott by e-mail and phone were unsuccessful. Spokesmen for the telephone companies, Discover and Barclays said they couldn’t comment. Verizon Wireless, based in Basking Ridge, New Jersey, is a joint venture of Verizon Communications Inc. and Vodafone Group Plc.
Abbott joined GE in 2002, according to a biography circulated at a 2008 banking conference. He expanded issuance of store-brand cards that also carry the MasterCard, Visa, AmEx or Discover logos and can be used elsewhere. Fairfield, Connecticut-based GE, the biggest U.S. private-label card issuer, has portfolios including Wal-Mart Stores Inc. and Dillard’s Inc.
He previously was senior vice president of card services at FleetBoston Financial, now owned by Bank of America Corp.
A consumer using the mobile service would be able to pay a merchant by holding a smartphone with an embedded radio microchip near a reader at checkout. The technology may allow people to forgo plastic cards and enable retailers to send customers electronic receipts and rewards in real-time.
Merchants 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.
In August, people with knowledge of the plan said the project was code-named Mercury and that the carriers were considering pilots in Minneapolis, Salt Lake City, Atlanta and Austin, Texas.
Card networks and banks aren’t waiting for the U.S. carriers to offer payment-enabled devices. They’re working to develop their own technology that works with mobile phones on the market today, seeking a bridge until embedded chips are standard.
Visa has introduced U.S. consumers to products that can transform most smartphones, including Apple Inc.’s iPhone, into payment devices able to store multiple card accounts in an e- wallet.
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