Wireless carriers scale down scope of mobile payment system
(Reuters) - The biggest U.S. wireless carriers, AT&T Inc, Verizon Wireless and T-Mobile USA, are not setting up a separate network for payments on transactions done by phones, the Wall Street Journal said.
Context & Ripple Effects
Per a Wall Street Journal report carried by Reuters on May 4, 2011 — unconfirmed by the carriers themselves — AT&T, Verizon Wireless and T-Mobile USA are not building a standalone network for phone-payment transactions, narrowing whatever joint payments ambitions the trio held. The report lands amid a broader retrenchment toward core connectivity revenue: Verizon has already confirmed it will replace unlimited iPhone data with usage-based tiers around mid-summer 2011, launched the iPhone 4 on its network in January, and tested a cheaper entry point with its $15 data plan last October.
The strategic read from that arc is consistent: with spectrum-hungry network upgrades underway and tiered pricing coming, the carriers' capital and attention are going into the pipe, not into becoming a payments intermediary competing with card networks and banks.
First-order effects
- If the Journal's report holds, any carrier wallet offering would run across existing infrastructure rather than a new settlement network, leaving banks and card networks in place as the transaction rails while AT&T, Verizon and T-Mobile avoid the cost of standing one up.
- Verizon's confirmed pivot to metered iPhone pricing from mid-2011 means the near-term revenue story for all three carriers is data tiers and device attach, not payment fees.
Second-order effects
- With the carriers stepping back from a proprietary payment network, the tap-to-pay interface shifts toward handset makers and OS platforms, who become the more natural owners of the customer-facing wallet.
- Merchants and financial institutions keep negotiating payments directly with card networks rather than facing a carrier-owned intermediary layer, preserving the current fee structure.
Third-order effects
- The pattern points to US carriers settling into a role as connectivity providers and policy controllers of what rides on their networks — monetizing access and data plans — rather than operators of adjacent financial services, though whether they exit payments entirely or partner in remains unresolved while the report is unconfirmed.
The trend: US wireless carriers are concentrating on connectivity monetization through tiered data rather than building out owned networks in adjacent industries like payments.