Digital Transactions Authoritative, insightful and timely information for payments professionals
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Fidelity National Information Services Inc. (FIS) threw its hat into the mobile-wallet ring last week, a market that already includes offerings from major payments and tech companies as well as smaller players. But FIS’s wallet has some attributes that could stand out in an increasingly crowded market.
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Jacksonville, Fla.-based FIS is positioning the wallet as a white-label service that potentially could be used by its thousands of its bank and credit-union clients as part of their mobile-banking services. FIS has another advantage in that merchants can hook up to the software-only service, which uses bar-code technology and doesn’t require new hardware, through the FIS-owned NYCE electronic funds transfer network. And the core technology comes from a suburban Boston-based start-up, Paydiant Inc., whose principals have experience in payments technology with other companies.
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“We think we’re different from some of the other third-party models in that we’re not putting our brand out in front of them,” Doug Brown, FIS senior vice president of mobile financial services, tells Digital Transactions News.
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Brown wouldn’t list FIS’s mobile-wallet competitors by name, but “third parties” in the business include Google Inc. with its Google Wallet, the Isis joint venture of mobile-phone networks AT&T, Verizon Wireless, and T-Mobile, and PayPal Inc. Add in Visa Inc. and offerings from merchants such as Starbucks Corp. and a host of small technology companies and you’ve got a lot of wallets looking to hold still-scarce digital money.
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Two financial institutions are testing the FIS wallet in what Brown calls a “pre-commercial launch.” FIS also is working with merchant acquirers that would sell the service to their merchant clients, as well as some large retailers directly.
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Like Starbucks, FIS’s system uses bar codes, but not in an identical way. At Starbucks, a customer using the coffee giant’s mobile app pulls up a bar code that the clerk scans with a reader to debit the customer’s prepaid Starbucks account. With FIS’s wallet, the merchant shows the code, either through the display on a point-of-sale terminal or electronic cash register, or, typically in the case of small merchant, by printing it out through the terminal. The customer then opens her bank or credit union’s mobile-wallet application with an iPhone or smart phone running Google Inc.’s Android operating system to scan the code and charge the purchase to a credit or debit card or bank account registered in her mobile wallet. “It’s similar but different” from Starbucks, says Brown. “It works for all merchants.”
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Customers’ payment data are stored on off-site servers, “in the cloud,” and not held by merchants, reducing their security burden. The FIS wallet, like its competitors, will offer merchants marketing capabilities such as electronic coupons.
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As unusual as it is, Paydiant’s twist on barcode scanning—with the merchant displaying the code and the customer scanning it to complete a payment—is not unique in the market. Sunnyvale, Calif.-based Cimbal Inc. is also marketing the concept for mobile payments.
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Both Google and Isis use the much-discussed near-field communication (NFC) technology for their wallets. While powerful, NFC requires the customer’s phone to have an NFC chip and the merchant to have a special contactless terminal. The U.S. currently has only about 200,000 such terminals deployed today.
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“We think NFC might require more time to market,” says Brown. “This looked like an opportunity to accelerate time to market.” He adds, however, that FIS’s wallet is compatible with NFC.
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Brown wouldn’t disclose the names of the acquirers and processors with which FIS is working to offer the service to merchants, nor the retailers that potentially could plug directly into the wallet’s back-office system through NYCE, which has about 2 million U.S. PIN-debit acceptance locations. “What has been a very positive thing for us is we’re seeing strong interest and acceptance by banks and retailers, but also intermediary players like processors,” says Brown.
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Paydiant provides the basic technology, although FIS is doing the integration work, according to Brown. Wellesley, Mass.-based Paydiant was founded only in 2010 and obtained $7.6 million in venture-capital funding in February. But co-founder Chris Gardner says he and Paydiant’s two other co-founders, Kevin Laracey and Joe Paratore, all founded or had major positions at edocs, an online-billing firm acquired by Siebel Systems in 2005; Siebel is now part of Oracle Corp. Gardner and Paratore then went on to m-Qube, a text-message payments provider for downloaded ring tones acquired by VeriSign Inc. in 2006.
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“This is really kind of our third whack,” says Gardner. “We’ve got a lot of experience.”
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In a related development, FIS reported Monday that it had increased its investment in mFoundry Inc., a Larkspur, Calif.-based mobile-banking and payments company whose technology powers Starbucks’ mobile app. FIS didn’t disclose its stake in mFoundry, whose other investors include MasterCard Inc., PayPal and NCR Corp. About 200 financial institutions use mobile-banking services from mFoundry and FIS, the processor said.
