Isis Launches Nationwide in Face of Questions About Merchant And Consumer Adoption

Consumers with compatible smart phones now can load the Isis mobile wallet onto their devices and pay with a tap anywhere contactless payments are accepted in the United States.

Isis is a payment scheme backed by wireless carriers AT&T Mobility, Verizon Wireless and T-Mobile USA. The smart-phone wallet, which uses near-field communication technology, had only been available in tests in Austin, Texas, and Salt Lake City. Isis, which works only with select smart phones using Google Inc.’s Android operating system, announced in July it planned the national launch for later in the year.

To use the mobile wallet, which can be used to make payments and redeem offers from participating merchants, consumers must have a smart phone that contains an NFC chip to enable two-way connectivity between the phone and the contactless reader. Isis says 40 compatible smart phone models are available from the three carriers. Consumers with older phones can order a compatible SIM to install themselves or visit one of the carriers’ stores, says Jaymee Johnson, Isis head of marketing.

Once the SIM is ready, the consumer must then download the Isis mobile wallet from the Google Play store and complete the account registration, including adding a funding source. Consumers can use a credit card issued by American Express Co. or from JPMorgan Chase & Co. They also can set up an American Express Serve account and add money from any credit or debit or bank account. Currently, account set up takes place only with the mobile-wallet app, Johnson says. Once that is done, consumers can begin using the app.

“All of the various pieces are ready,” Johnson says of the timing of the national launch. “We are able to pull together the operations side from the carriers. We were able to pull together the financial ecosystem from the banking partners, and we have scale from the handset side.” Any merchant using contactless readers, such as Walgreen Co. and RadioShack Corp., can accept Isis mobile payments. A merchant needs no agreement with Isis to accept an Isis contactless payment, he says. Isis is running promotional offers with Jamba Juice and Coca-Cola vending machines to entice consumer use.

Currently, only a small fraction of U.S. merchants are equipped to accept Isis or any other NFC service. There are some 430,000 contactless readers hooked up in merchant locations nationwide, according to researcher Aite Group LLC, which forecasts that number will climb to 660,000 next year and to more than 1 million in 2015.

Isis updated its app in October, giving it the ability to store loyalty programs and enabling the user to designate one to be automatically included with a payment card to complete a transaction and pick up eligible points. Similarly, offers the app receives are shown, allowing the user to pick one to accompany a designated payment card to earn a reward.

Of course, Isis still has to persuade consumers to use its mobile wallet. “The national launch means that any consumer anywhere in the U.S. can buy an NFC phone and download and use the Isis digital wallet,” says Rick Oglseby, senior analyst at Aite Group LLC, Boston. “That’s great but they need to be notified of the existence of the wallet and convinced to use it, which is by far the greater challenge.”

That effort should be aided by the fact that most newer smart phones already have the required NFC chip inside, Johnson says, and the process to begin using the app is not unlike using any other payment app.

Isis also faces challenges convincing merchants, Oglseby says. “Contactless technology is expanding, but to really get things going merchants need to become convinced that the demand generation and loyalty benefits are significant,” he says. “Even if Isis is successful in getting the devices and wallets into consumers’ hands, if merchants don’t promote it, consumers will likely never use it. It’s a big marketing challenge that will require lots of cooperation from lots of partners, getting that partnership network established and moving is the big next step.”

Isis' national launch, however, was underwhelming to Steve Mott, principal at Stamford, Conn.-based consultancy BetterBuyDesign. “This very, very quiet release is perhaps the biggest 'non-historic' event experienced in mobile commerce so far,” Mott says. “We waited, waited and waited, and AT&T and Verizon spent, spent, spent, only to see a very modest birth of an unsurprising offering that seems notable only for its reliance on Coca-Cola vending machines as an anchor national merchant.”

But Johnson was optimistic about merchant acceptance, asserting that most of the new payment terminals from major POS terminal makers include contactless technology. He also suggests that the number of contactless-enabled merchants will increase as they update their payment terminals to meet the coming EMV standard for chip card payments in the United States. A key deadline is looming in October 2015, when liability for counterfeit fraud will shift to U.S. merchants if they cannot process EMV card transactions.