Visa Testing NFC Memory Cards for Wireless Payments

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Visa and Bank of America are reportedly partnering for a trial program that will allow customers to pay for purchases using only a smartphone. The test program begins next month in New York, says Reuters, and runs through the end of 2010. The mobile transaction market, already embraced by other countries, is starting to accelerate in the U.S., as multiple companies begin to vie for leadership and land-grab the payment processing revenues that come with e-commerce payments.

Niether Visa nor BofA have outlined any details on the trial payment program, but it will likely take advantage of short-range wireless communications offered by near-field communications (NFC) . With a wave of an NFC-equipped phone near a payment terminal, the transaction is processed. Tired of waiting for handset makers to build phones with the proper wireless chips, Visa cleverly worked with Devicefidelity earlier this year to marry NFC chips on the standard microSD memory cards that many modern phones already use. The approach makes sense as it wouldn’t require consumers to purchase new phones just to make wireless payments: a simple memory card swap would be used, which reduces a large barrier of adoption for wireless mobile transactions.

Although Visa appears to have a smart solution, the wireless payment battle is far from over. MasterCard, a key competitor of Visa, spent $520 million this week on DataCash, with plans to expand e-commerce and mobile solutions. U.S. cellular carriers are also stepping into the ring by attempting to standardize payments made through their networks. The big elephant in the room may be Apple, however. Armed with hundreds of millions of credit card accounts in 90 countries through its iTunes Store, Apple has near-field communications patents that could help it do an end-around the traditional banking companies and earn a small percentage of mobile transactions. Every wave of an iPhone could be a wave goodbye to the processing fees that Visa, MasterCard and others have built their business upon.

Related GigaOM Pro Research (subscription required): A Mobile Payments Glossary

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