Starting in September, Bank of America customers will be eligible for a test program allowing them to pay for store purchases using their smartphones. The country's largest consumer bank is partnering with Visa to run the pilot in the New York area, marking the biggest step the two companies have taken so far to create a "digital wallet" with a range of financial capabilities.
Visa will undertake a similar test program in October with US Bancorp. The United States has been slow to deploy mobile payment technologies that have been used in countries like Japan, the United Kingdom, Turkey, and South Korea for years. A Bank of America spokesperson said payments from smartphones are a "critical capability" since users have accepted and adopted bank services from their mobile phones.
A select group of employees and customers in the New York area will be chosen to install small chips supplied from Visa and its technology partners into their smartphones, which will send radio signals over short distances. Customers will need to wave their handset near point-of-sale devices in stores in order for their bank data to be collected and to complete their purchases. The bank did not release figures on how many people would participate in the pilot.
If the pilot goes well, the service may be expanded, a Bank of America spokesperson told Bloomberg. Among the retailers that can accept mobile payments are McDonald's, Burger King, Home Depot, Walgreens, and CVS, as well as New York City taxis, the spokesman said.
But broad acceptance of using a smartphone to make purchases may still be a few years away, said Marc DeCastro, research manager of consumer banking & community banking at IDC Financial Insights, a subsidiary of IDC. "Until people are very comfortable being able to do a wipe of the data on their mobile devices if they are stolen or lost... you'll see somewhat of a barrier,'' he said, adding that there is also a limited group of people using smartphones presently.
People need the peace of mind of knowing they can input a number and code on another device that shuts off their phone completely if it is lost or stolen, he said. However, carriers want people to pay for the remote disabling service as a revenue generator, and with a limited number of retailers offering mobile payments right now, DeCastro said he isn't convinced people will want to pay extra.
Momentum has been growing in the mobile banking space, including test programs from carriers and other credit card companies. A joint venture is in the works among Verizon Wireless, AT&T, T-Mobile USA, and Discover Financial Services to offer mobile payment services, according to Reuters. It is not clear whether the plan will use similar technology with chips placed inside the phones or if cell phones will be developed that have wireless payment technology embedded inside.
Mobile banking was first introduced by Bank of America in 2007. The bank has over five million customers who conduct $15 billion in transactions from their cell phones, mainly bill payments and transfers.
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