In a move that could one day replace wallets with mobile phones, three major wireless carriers —AT&T Mobility, T-Mobile USA and Verizon Wireless—have signed on to participate in a mobile payments network that uses smartphones and Near Field Communication technology to enable consumers to use their phones to pay for goods in stores.
Called Isis, the program, led by former GE Capital Financial executive Michael Abbott, will at first focus on building a payment network that enables mobile phones to make point-of-sale purchases using NFC—a wireless technology that lets devices exchange encrypted payment information over a short distance.
NFC technology is used to a degree in Japan and Europe for making payments with a mobile device by tapping or waving the phone in front of a properly equipped terminal. Isis plans to do this in the U.S., but it may have an uphill battle. Despite the technology being around for years, NFC has yet to take off with consumers, card issuers or merchants in North America. However, consumers in such major cities as Washington and Chicago are accustomed to paying transit fares with a tap of a plastic card, using contactless smart card technology that provides the underpinnings for NFC.
And Isis does have some power on its side. The three carriers on board collectively provide wireless services to more than 200 million consumers who will have access to the Isis service. Additionally, Isis is already working with Discover Financial Services’ payment network, which is accepted at more than seven million U.S. merchants, to develop a mobile payment infrastructure. And Isis has already found a big issuer. Barclaycard US, part of Barclays PLC of the United Kingdom, is expected to be the first issuer on the network. Beyond the inaugural deals, Isis is available to all merchants, banks and mobile carriers, and the company expects to introduce its service in key geographic markets over the next 18 months.
“In the beginning, we intend to fully utilize Discover’s national payment infrastructure as well as Barclaycard’s expertise in contactless and mobile payments,” says Isis CEO Abbott. “Moving forward, Isis will be available to all interested merchants, banks and mobile carriers. While mobile payments will be at the core of our offering, it is only the start. We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets, and transit passes.”
A spokesman would not reveal names of any merchants planning to accept Isis, merchant or consumer fees for the service, or any additional details about the program. He said Isis will be making more announcements in the coming weeks.
Wireless carriers have been looking for ways to generate revenue from mobile payments. Sprint, the only one of the four largest U.S. wireless carriers not part of Isis, is attempting to launch its own mobile wallet. Sprint Mobile Wallet , which would allow Sprint users to pay for both digital and physical goods. It would also enable consumers to set up a user name, password and PIN with Sprint and then register a Visa, MasterCard or Amazon Payments account with a mobile wallet. When the consumer goes to pay, she selects Sprint Mobile Wallet and the service presents her with her registered payment options. She selects a payment account, enters her PIN and the proper account is charged. Electronic and mobile commerce payment provider CardinalCommerce is hosting the transactions for Sprint. Once a customer enters his PIN, it is encrypted and sent to CardinalCommerce, which facilitates the transaction between the customer and the merchant, Sprint says.
Merchants including SkyMall and Gameloft have already signed on to test the service. Sprint Mobile Wallet will be available on a variety of Sprint devices and can be used at no additional charge by customers on an Everything Data plan. Initially, Sprint Mobile Wallet will be available to download through Sprint Zone. In 2011, it will be preloaded on many new Sprint devices, Sprint says.
The long-standing barrier blocking wireless providers from launching mobile payments has always been credit. A carrier might feel comfortable letting a consumer buy a cheap digital download like a ringtone or a game and charging it to a phone bill, but they are leery of extending big lines of credit. That’s why getting mobile payments going full steam requires getting banks and other credit card issuers on board.
Both Isis and Sprint Mobile Wallet have found a way to add card issuers to the mix, although each program has its drawbacks. While Sprint’s works with all Visa, MasterCard and Amazon Payments accounts, it is only available for online purchases for now. Isis meanwhile, only works in stores and with NFC-equipped terminals and contactless payment cards that are part of the service.
The four big U.S. wireless carriers—Verizon, Sprint, AT&T and T-Mobile—are making big investments to generate new revenue streams, Charles S. Golvin, principal analyst for mobile telecommunications at Forrester Research Inc., said in a presentation to retailers earlier this year. Besides the cellular networks that are moving from 3G to 4G speeds, he said there will also be improvements in shorter-range technology, such as NFC.
Just three of those operators have invested $15 billion in the last 18 months in their technology, Golvin said. “They have a lot of control and power and influence, so we need to understand their priorities and objectives.”
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