AT&T and Verizon to Take on MasterCard and Visa

As subscription growth slows, wireless carriers are desperately searching for new ways to make money in the U.S. Sprint-Nextel (S), AT&T (T), Verizon Wireless and T-Mobile have roughly 275 million customers among them and they've pretty much exhausted many of the traditional ways of making revenue (i.e; fees for data and video). In fact, heated competition among the carriers has forced them to lower the cost of their plans in order to retain customers.

But AT&T, Verizon Wireless and T-Mobile have a plan: move into wireless electronic payments. Bloomberg reports: "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."

The idea is that customers will be able to purchase items just by waving their smartphone. The first tests will take place in Atlanta and three other U.S. cities. By embarking on this business path, however, the carriers will be taking on some formidable competition, including Visa (V), MasterCard (MA), American Express (AXP) and PayPal. Retailers who pay a small percent of each credit card transaction to Visa or MasterCard may be ready to help the new venture if it will mean a reduction in their fees.

Electronic payment is considered the next big frontier in wireless services and several companies are trying to get a piece of the market. Search companies Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT) are battling for market share, while app stores, led by Apple (AAPL), are fighting for software downloads.

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