Wednesday, December 1, 2010

Cash, Credit, or Cell?

"Hey can you cover me I left my charger at work?"

This is how you will sucker your friend in to paying for your night out in a year or two.


Yeah... you, Master Card, Visa, and American Express too.

In just a few short months consumers will have the option to pay with cash, credit card, or their smart phone.

That's right soon your smart phone will be just like a credit card except better; it won't be a credit card.

Who Is Behind This New Payment Method?

More then several players are going to be directly offering a cell phone payment method.

Below is a quick list of the bigger companies creating an alternative credit method for your smart phone.


AT&T, Verizon, and T-Mobile are all joining forces to form a company or entity or whatever they are call such a partnership. This new transaction processing company will be called Isis.

Google and the Android Operating System

Google is developing a system that will integrate with their Android operating system. All a phone will need is the embedded chip.

New Start-Ups 

There are several new companies that have already formed that are going to offer solutions for both consumers and merchants as an alternative to paying with the old credit card.

Why the Push to Create a New Payment Method and Credit Card Alternative?

Mobile Networks

This is the obvious answer. All the big data networks such as AT&T, Verizon, and T-Mobile will expand their offered services in a big way. The electronic transaction solution business is one hell of an extra business to get in to. They will get a cut of every transaction just like the credit card companies do now.

Consumer Choice

Then of course there is the consumer demand for an alternative to credit cads. there is an obvious benefit to being able to pay with your smart phone in addition to the other two choices that we already have. though this is an obvious motive for coming up with another merchant transaction solution and alternative to credit cards it is not even close to the main driver of this new industry.

Merchant Incentive - A Cheaper Better and Smarter Alternative

Merchants are going to welcome this thing with open arms. Merchants have a real love hate relationship with credit cards. The problem that merchants have with the existing credit card transaction solutions is the price they are charged by the credit card companies. It really puts a dent into the margins.

Also the credit card companies have been increasing rates on the merchants to make up losses that the banks have incurred during the credit crunch and massive waves of loan defaults.

To top it off the credit card companies have made it a breach of contract for merchants to say anything about the expense to consumers.

In fact many people have no idea how credit card companies make money. It's not the interest we all pay.

Merchants will be able to cut the transaction expense in half. This means bigger gains in margin. This thing will be huge for merchants.

Credit Card Companies are in Trouble

The one thing that is crystal clear amidst all this new possibility and choice that consumers, networks, and merchants will have in the very near future is that credit card companies are not going to fair well.

Sure there is going be a place for credit cards. Trust me when I tell you that credit cards are not going anywhere. I am actually surprised that the bigger credit cad companies are not more involved with this new movement but the again I guess these phone networks have a pretty solid infrastructure already in place.

My next post is going to be on what this will mean for consumers and merchants as well as the data networks. The positive impact and benefits of ths shift is going to be a lot bigger then most people would think and I really want to paint a vivid picture for everyone.

So check back soon!

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