AT&T, Verizon, T-Mobile Teaming for Mobile Payments

Telecom rivals AT&T and Verizon are teaming up to create a mobile payments scheme that will bypass Visa and Mastercard, according to a Bloomberg article posted this morning.

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.

The trial would be the carriers' biggest effort to spur mobile payments in the U.S. and supplant more than 1 billion plastic cards in American wallets. Smartphones have encroached on tasks ranging from Web browsing to street navigation and now may help the phone companies compete with San Francisco-based Visa and MasterCard, the world's biggest payments networks.

The new payment service would use contactless technology to complete purchases in stores. Payments would be processed through Discover's network, currently the fourth-biggest behind Visa, MasterCard and American Express Co. Barclays would be the bank helping to manage the accounts, according to the Bloomberg story. AT&T and Verizon Wireless are equal partners in the venture and T-Mobile has a smaller stake.

It's a bit ironic that this challenge to Visa and MasterCard's payments supremacy comes after Congress passed limits on interchange fees, the main source of contention between retailers and the card giants.

Perhaps this venture will open a door for other banks that want to offer mobile payments over tried-and-true payment networks, but not necessarily work with the card companies.