CHICAGO — Smart phones already enable you to snap photos and bank online. Now banks and credit card companies think it might make sense for your phone to take over the functions of credit and debit cards.
Bank of America, which recently tested what’s known as mobile-payment technology in Charlotte, N.C., just began a bigger-scale pilot in New York City.
And last week, the chief executive of credit card issuer Discover Financial Services said, “We continue to be optimistic about the future for mobile payments.”
While consumers have embraced mobile payments in Japan and Korea, the Federal Reserve Bank of Boston says in a recent report that it doesn’t expect widespread acceptance in the United States for at least three to five years, when phones are replaced and more merchants buy devices that interact with the technology.
Still, news about the pilot programs has prompted Consumers Union to urge regulators to ensure that federal protections that apply to lost or stolen credit or debit cards also be extended to new payment methods.
Discover and Bank of America have experimented with stickers applied to phones. Discover’s “smart sticker,” for example, is embedded with a microprocessor chip enabling contactless payments between the sticker and a reader device near the merchant’s cash register.
Bank of America’s latest test, in New York, uses a SanDisk memory card — about the size of a thumbnail — installed inside the back of an iPhone or BlackBerry, enabling a downloadable application for a virtual wallet.
Michael Upton, eChannels executive for Bank of America, declined to say how many consumers are part of the New York test, but said the trial is “statistically significant.” He said the technology is easy to use.
“When you’re at a place, you open your (virtual) wallet and select the account,” said Upton. “You tap or get your handset close enough to the contactless reader, and you’re good to go.”
Discover CEO David Nelms said more than 100,000 merchant outlets have installed devices that can read Discover’s mobile-payment stickers, called Zip, including Best Buy and most McDonald’s.
“I have a Discover Zip sticker on the back of my BlackBerry and I use it when I buy stuff at Best Buy or McDonald’s or in our cafeteria,” Nelms said. “I hold it up to the terminal at Best Buy. I don’t even take the wallet out of my pocket, and the clerk says, ‘Wow, that’s really cool.’ “
Nelms declined to disclose the number of people participating in Discover’s pilot, but a November 2009 white paper on a Discover Web site said more than 700 company workers in Riverwoods, Ill., and Salt Lake City were participating.