Credit Card Issuers Beware: The End Is Nigh!

That digital Swiss Army knife at your belt is about to get a lot more useful. The darn thing is ready to replace your wallet.

Mobile phones have come a long way from the simple call-maker of a decade ago to today's video-pumping, game-playing, navigation-handling minicomputers that just happen to handle voice calls on the side. TomTom and Garmin (Nasdaq: GRMN) are rightly nervous about being replaced by this ubiquitous all-purpose device. If I were Sony, I wouldn't design another handheld gaming system unless I could bake it into a fully functional Sony Ericsson handset. And so it goes.

According to Bloomberg, a consortium of telecom providers and financial institutions has now teamed up with an ambition to replace cash and credit cards at the checkout register, wherever you shop. AT&T (NYSE: T) and Verizon (NYSE: VZ) are said to be the lead investors in this social experiment with some help from Deutsche Telekom subsidiary T-Mobile. Transaction-handling expertise comes from Discover Financial Services (NYSE: DFS), and big-bank cash reserve muscle is courtesy of Barclays.

Visa (NYSE: V) and MasterCard (NYSE: MA) are walking around with big, red bull's-eyes on their backs, and there's a smaller one for American Express (NYSE: AXP). MasterCard and Visa alone combine to handle a staggering $2.5 trillion of consumer spending last year, according to the Nielsen report. It doesn't take much of a cut there to realize some hefty sales and profits, so I can certainly understand why the telecoms want in on this game.

Visa says that it's working on digital payment services but in a different way -- the Barclays/Discover solution will involve new hardware and a familiar mode of operation: Leave your wallet at home and just wave your phone over the payment pad. Simpler is always better, right? Visa's idea seems to revolve around software for today's smartphones, and I don't know how it would work.

If either project is successful, it will change your life whether you want it to or not. Whether Visa or the telecom consortium reaches the finish line first, or someone else bypasses the whole field out of the blue, the time for phone-based payments is coming soon. This already works in places such as Japan and Turkey, and you just can't argue with increased convenience as long as you've made sure the system is secure and works perfectly every time.

Mix in the connectivity of a smartphone with all the demographic, location, and browsing-habit information that entails, and this phone-based credit card may become the perfect marketing machine. I know a few other companies that would love to see this happen.

Change is coming to how we handle money, and soon. But are we headed into an ultra-connected nirvana or an Orwellian dystopia? Discuss in the comments below -- tinfoil hat optional!