January 8, 2004, 12:00 AM

Merchants check out cell phones as an alternative to credit cards

Like their counterparts in Europe, where cell phones have become a common means of processing consumer purchase transactions, U.S. merchants are showing a lot of interest in mobile telephony as an alternative to credit cards, an analyst says.

Like their counterparts in Europe, where cell phones have become a common means of processing consumer purchase transactions, U.S. online merchants are showing a lot of interest in mobile telephony as an alternative to credit cards, an analyst says.

 

"This is popping up all over Europe with millions of transactions," says Jeff Foster, executive vice president of Retail Decisions, a payments processing and services company with about 100 retailers among its client base.

 

He adds that European merchants as well as consumers like using cell phones as payment devices for online transactions, because it frees them from having to process extensive billing information for each web purchase. Instead, an online shopper simply enters her cell phone number onto a web checkout page, then waits for a text or voice message confirming the transaction on her cell phone. The shopper then authorizes the transaction with a text message reply, or by speaking into an automated system using interactive voice response technology. The purchase price is then added to the shopper’s next cell phone bill, and the cell phone company charges the merchant a percentage of the transaction value.

 

Foster notes that the use of cell phones as payment devices has taken off in Europe partly because of a more coordinated cell phone network. "In the U.S., cell phone companies are more competitive, so a retailer would have to coordinate arrangements with several companies," he says. He adds, however, that as interest increases among merchants and consumers in the U.S., mobile phone network providers are expected to move toward a standardized system that would support the use of cell phones as payment devices.

 

 

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