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Demographics, Transit Helped Drive Salt Lake Selection, Isis Says

Local demographics and the availability of a mass-transit system that uses contactless technology for fare payment chiefly accounted for the decision by Isis, the joint venture formed late last year and led by major wireless carriers, to launch its first pilot next year in Salt Lake City, Utah,  Isis’s head of marketing tells Digital Transactions News. Isis is planning launches in a number of locations for a mobile-payments system that relies on near-field communication (NFC) technology, a form of contactless payment that replaces cards with handsets.

Responding to questions by e-mail, Jaymee Johnson also says the venture is attracting interest from a number of local merchants, though he refuses to give details. “We’re receiving very positive responses from merchants but have nothing to announce at this time,” Johnson says. One big merchant already on board is the Utah Transit Authority, which operates what is so far the only transit program in the country offering contactless capability for general-purpose credit and debit cards.

“The Utah Transit Authority has been a pioneer in contactless transit payments,” Johnson notes, adding that transit is a critical factor for Isis. “We strongly believe that transit is the killer mobile app, so it was important for Isis to partner with an organization like the UTA that was early to adopt and implement a system with near-field communication technology. Our partnership will revolutionize transportation fare payments by allowing customers more choices and the ability to access the entire transit system with the tap of their phone.” Transit, which relies heavily on speed of throughput, also delivers a steady flow of at least two transactions a day from each user, experts point out.

Johnson also says Isis likes the characteristics of potential users in Salt Lake. “Salt Lake City consumers are innovative and tech savvy,” he says. “These demographics align with Isis’s target customer base and make for an ideal launch market.”

It remains unclear how many contactless points of sale there are in Salt Lake, outside of the UTA. Even on the UTA, the volume of contactless transactions has been very small, a UTA official told Digital Transactions magazine for a story that appeared in its December 2010 issue. Nationally, contactless coverage at merchants is very spotty, with perhaps only 150,000 readers deployed. Statistics released this week by the Federal Reserve indicate there were just 50 million contactless transactions in 2009, with 30 million on signature-debit cards and 20 million on credit cards.

And it’s hard to say whether demographics like those of Salt Lake, and a planned or existing reliance on contactless fares for mass transit, furnish clues as to which towns Isis will pick for launches after Salt Lake. On that question, Johnson is tightlipped, refusing even to say how many cities the venture has in its plans. “Salt Lake City is the first of many markets,” he says. While the online publication NFC Times reported earlier this week that Isis’s next market will be Austin, Texas, Johnson refuses to confirm that report.

Breaking a long silence, Isis announced early this week it will launch its Salt Lake pilot some time in the first six months of next year. Isis is a joint venture of AT&T Inc., Verizon Wireless, T-Mobile USA, Discover Financial Services, and Barclaycard USA.

At Isis’s debut in November, its officials said Discover would route Isis transactions on its network while providing entrée to its roster of accepting merchants. Barclaycard, meanwhile, would hold and manage the proprietary Isis accounts that will be issued to consumers. While Isis said at the time it would be open to adding more banks and carriers, it was silent on the question of other payments networks. Johnson, however, says Isis will embrace interested networks. “We have always believed in an open mobile commerce system that delivers consumer choice and welcome all banks, payment networks, and merchants to join us,” he says.

Still, Isis faces what could be stiff competition. In what appears to be a bid to steal a march on its rivals, Sprint Nextel Corp. told Bloomberg News this week it is working with payments networks and mobile-phone manufacturers to launch its own NFC payments system this year. Few details were available. Ironically, Sprint was a partner in the Isis venture before dropping out some time before Isis was formally unveiled late last year. These developments come in the wake of news last month that online search giant Google Inc. is developing an NFC-based system with MasterCard Inc. and Citigroup Inc. Google’s product will be based on its Nexus S smart phone, which contains an NFC chip.

The appearance of such players in the nascent NFC market could be putting pressure on Isis. “The timeline is shrinking to establish themselves as a major player,” says Beth Robertson, managing director at Javelin Strategy & Research, a Pleasanton, Calif.-based firm that follows electronic payments. “They established a lot of visibility and splash [when they announced their debut.] They have to show they’re moving toward reality.”

For his part, Johnson appears unfazed, pointing to such developments as confirmation of market interest in NFC. “We are not in a position to comment on others’ plans other than to say that we believe Isis provides the scope and scale to move toward widespread adoption of mobile commerce,” he says. “Recent developments simply show that the industry is serious about making mobile payments the future of purchasing transactions.”

Others agree. “This is about migrating from contactless cards [to mobile],” says Christopher T. Cox, vice president for mobile commerce solutions at First Data Corp. The Sal Lake announcement , he adds, “really is driving a lot of excitement and interest around NFC mobile payments, which is a good thing,” First Data made some NFC news of its own this week, announcing it is launching a Trusted Service Manager (TSM) service with SK C&C USA, a vendor of mobile-commerce technology. A TSM manages secure provisioning of account credentials from multiple issuers to NFC wallets in mobile devices.

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