AT&T and Verizon, Deutsche Telekon and T-mobile are working with Discover to create an alternative payment network to Visa and MasterCard that uses smart-phones instead of credit and debit cards for payment.  Could this also be the future of gift cards?

A payment system like this has been talked about in the US since the early days of the Internet and places like Japan and Korea have healthy mobile-phone payment services, but nothing has ever gained traction here.

It is not hard to imagine that such a system could easily handle gift card transactions as well as credit and debit transactions.  The chief benefits would be:

Benefits to merchants: Lower cost of issuing cards as everything is electronic; no actual printed card to produce

Benefits to consumers: You will always have your card with you, as long as you have your phone, which is probably most of the time for most people.

Benefits to everyone: less of a chance of the type of fraud that occurs when gift cards are on display and easily accessible.

However, until such a system is ubiquitous, merchants would have to support both the newer electronic system and traditional gift cards, probably increasing costs of gift card programs in the short term.