US Bank Tests Retail Payments With Smartphones

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The Bank of America Corp (Bofa) is to begin a test program next month that lets customers use smartphones to pay for purchases in stores, according to the Reuters newsagency.

In an attempt to create a ‘digital wallet’, the biggest US consumer bank is to run the test program from September through to the end of the year, in New York. A host of financial capabilities are to be built into the latest, most sophisticated mobile phones, allowing customers to ditch a multitude of credit cards, and use their smartphone instead.
Bank of America and other major U.S. banks, technology companies and mobile phone providers are jockeying for the lead in a technology some say could become a primary means of everyday purchases. 
Currently mobile phone payments are used primarily for small-dollar, high-volume transactions — like cups of coffee or subway fare — that customers make every day, said Michael Upton, BofA’s customer solutions executive for mobile banking. Upton said: “We want to learn how folks incorporate this into their day-to-day lives. But we do believe adoption happens at a pretty quick clip.”
Japan has been using such technology for several years, but the US has been slower to adopt the technology. 
“We see this as a critical capability given the increasing acceptance and adoption of bank services on the phone,” Laurie Readhead, Bank of America’s head of electronic commerce, told Reuters.
The program will allow selected New York-area employees and customers to install small chips in their smartphones that emit radio signals over very short distances. Customers would then “bump” their phones with point-of-sale devices in stores — actually they need only wave the phones near the devices — and their bank account data would be collected and their purchases completed.
Bank of America declined to say how many people or what other companies would be involved in the pilot.
Credit card companies, Visa Inc and MasterCard, have invested heavily in the technology. Visa, the world’s largest credit and debit processing company, said in February that it planned to start testing technology that would allow customers to make in-store payments using smartphones. 
Visa did not say what banks would conduct the tests. But it has strong historical ties to Bank of America. The bank created what would become Visa in the 1950s, and remains one of the largest issuers of Visa cards today. 
Competition is also said to be increasing from outside the banking world. Several US phone service providers, Verizon Wireless, AT&T, T-Mobile USA and Discover Financial Services are working on forming a joint venture aimed at offering mobile payments services, acording to Reuters.
Bank of America introduced mobile banking in 2007 and has more than 5 million customers conducting $15 billion in transactions via their phones. It also has 29 million online banking customers conducting 1.5 billion transactions electronically, according to Readhead. These services are said to expand as more sophisticated mobile phones, like Apple’s iPhone and RIM’s Blackberry become more common, said Reuters. 
Sales of smartphones continue their upward trend. 42 percent of all consumer handsets sold in the US in the second quarter were smartphones, a rise of 40 percent since the second quarter of 2009, according to NPD Group Inc, a market research firm.
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