UPDATED 09:38 EST / AUGUST 02 2010

AT&T and Verizon Want to Be Your Banks, Too.

AT&T and Verizon are teaming up to test a new payment option for consumers–skip the credit or debit card all together. The two service providers are hoping that the centralizing magic of your smart phone will carry over to payments as well–and they’re probably right.

From BusinessWeek,

The partnership, which also includes Deutsche Telekom AG unit T-Mobile USA, may work with Discover Financial Services and Barclays Plc to test a system at stores in Atlanta and three other U.S. cities that would let a consumer pay with the contactless wave of a smartphone, the people said. The carriers have been searching for a chief executive officer.

“This is definitely a game-changer,” said industry consultant Richard Crone of San Carlos, California-based Crone Consulting LLC. The firm advises card networks, issuers and phone companies. The mobile carriers “are the biggest recurring billers in every market. They are experts at processing payments,” Crone said.

It’s something I’ve suspected for quite some time now, as I listed it as a top prediction for 2010 (a project Mark and I never got to publish). We’ve seen hints of this trend all over the place: cash is becoming less relevant, virtual economies are thriving, and wireless providers have been taking payments for mobile games and apps for years now. It only makes sense that the carriers delve into financing on a more legit scale.

In addition to astronomical monthly phone bills, you probably already have a bunch of stuff tacked on. Charity donations, ring tone subscriptions, mobile apps and other things you’ve long forgotten. Why not take things a step further by centralizing your payments for retail stores as well? You’re phone already has most the private account information you need, and AT&T and Verizon get a whopping new revenue stream.

Real Virtual Life

I was at the park earlier this summer and came across a vending machine that didn’t accept cash at all. It reminded me of that scene in I, Robot where Bridget Moynahan finds herself frustrated with an “ancient” CD player that requires hands-on interaction, and doesn’t respond to her voice. What a conundrum.

The current virtualization trend takes a major control component away from our level of interaction (we already have smart phones that are 100% touch screen). This goes for our currency as well. As soon as I saw that cash-hating vending machine, I knew it was only a matter of time before it accepted Facebook credits as well as plastic cards. AT&T and Verizon knew it too.

In Visa and MasterCard’s defense, the presence of carrier financing shouldn’t destroy their businesses. Both card companies have platforms for integrating payments into mobile apps, and their continued move into smart phone tech will aid in the virtual currency revolution overall. Online networks and mobile apps have seen a huge wave of payment platforms like SuperRewards and Payfone in the past two years–it was only a matter of time before the mobile service provider decided to get in on the action. Google is already making it easier for carriers to do so, with a recent update to its terms for mobile app purchasing options.

I also think that developers will find several opportunities for monetizing their apps with the growing number of payment outlets, lowering the purchase decision barriers for consumers and providing more value around mobile devices. As paper cash decreases in value, however, virtual rewards will need to be converted into redeemable “cash” in a far more tangible sense. Offering real virtual cash in return for feedback will be the future’s way of monetizing consumer behavior, employing them in a sense for their interaction with the brand. Adding real cash value to this interaction will be a necessity in marketing.

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