May. 4, 2011
The telecommunications companies that own the Isis mobile-payments joint venture have apparently given up on the idea of creating their own merchant network and instead are redirecting their efforts on a mobile wallet, according to a published report. If confirmed, the Isis move means that the existing payment card networks and not upstarts will command the dominant positions as mobile payments move haltingly from the drawing board and tests and into the payments mainstream in the next few years.
Citing unnamed sources, The Wall Street Journal reported Wednesday that AT&T Inc., Verizon Wireless and T-Mobile USA were “scaling back” their Isis joint venture that they hoped would compete with Visa Inc. and MasterCard Inc. and generate transaction revenues from payments. Isis is based on near-field communication (NFC), a form of contactless technology that replaces debit and credit cards with mobile phones that can make a payment when tapped on or near a terminal that exchanges data with the phone’s NFC chip. Initial plans called for transactions to be routed over the Discover Financial Services network, with Barclaycard’s U.S. unit as the first issuer of Isis accounts. Instead, Isis is now talking with Visa and MasterCard about a so-called mobile wallet embedded in mobile phones that would store consumer information and work with various networks, according to the Journal.
As has been the case since last November when the carriers announced Isis’s formation, much about the joint venture remains shrouded in mystery. Isis did not respond to several Digital Transactions News requests for comment.
“If the reporting is accurate then what they’re doing is moving from a network that competes with Visa, MasterCard and others to a wallet system that works with multiple networks,” says payments consultant Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group.
Isis so far has announced just one merchant, the Salt Lake City-based Utah Transit Authority. “This is another example of how hard it is for new intermediaries--handset makers, carriers, Google, etc.--to insert themselves into the payment process,” says Richard K. Crone, chief executive of San Carlos, Calif.-based Crone Consulting LLC, via e-mail.
The UTA is the nation’s only transit system that accepts general-purpose contactless cards, though such cards currently account for only a small fraction of its fares. A UTA spokesperson tells Digital Transactions News by e-mail that the agency still expects to launch Isis in 2012’s first quarter. “No change in plans from UTA’s perspective,” he says.
Visa declined to comment. A MasterCard spokesperson says by e-mail only that “mobile is a priority area at MasterCard. We are in discussions with all players in the mobile-payments ecosystem.”
Exactly what Isis’s mobile wallet will do, and how the carriers will make money from it, is unclear. Ablowitz, who earlier noted that merchants weren’t too keen on Isis’s initial pricing plans, says Isis might be able to attract merchants with electronic coupons that build business. “If they’re trying to value-add with coupons, at least they can make the argument that they’re not adding to retailer costs.”
Despite their apparent retreat from core payments, the carriers still control a valuable piece of real estate on mobile phones, the subscriber identity module (SIM) card. While technology is available that lets SIM cards and NFC chipsets communicate, some mobile carriers prefer to use the SIM card as the so-called secure element that could house virtual payment cards and other media. “SIM is the wireless carriers’ sacred ground and walled garden that they completely control,” says Crone. “The wireless carriers will use the SIM card to assure their financial participation in any NFC payment scheme, with or without their own payment network.”
A Discover spokesperson downplayed the Isis news, noting in an e-mailed statement that Isis “had already indicated that it was making its wallet available to all merchants, banks, networks and carriers. Our role will continue to be in the processing of mobile payments that run over the Discover network. Isis remains a key component of our mobile strategy.”
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