After months of delays, Isis has announced the debut of its mobile payment system. A joint venture by AT&T, T-Mobile, and Verizon, Isis made news earlier this year at the Mobile World Congress in March, but has been pretty quiet since then. During that quiet period a number of other players in the mobile payment market have stolen the spotlight and announced major deals.
Apple is expected to eventually unveil its own mobile payment system, one that will most likely be based around the iTunes Store payment system, but hasn’t made announcements beyond iOS 6’s Passbook feature. Apple has also kept quiet about whether it will include NFC chips used in some mobile payment systems in the upcoming iPhone 5, which some analysts and pundits consider a barrier to entry into the mobile payment market.
The Isis launch, which will rely on NFC support (hardware and software), is set to launch next month in just two markets – Salt Lake City, Utah, and Austin, Texas. The system will process payments via a user’s credit card account that will be on file with Isis (as of this point, only a handful of credit card brands support Isis). Isis is teaming up with MasterCard and Visa for payment processing.
That’s a distinct change in tactics as Isis was originally conceived and designed to bill purchases to a user’s account with his or her mobile carrier. That could have been a potential goldmine for carriers. The shift in strategy is almost certainly a factor contributing to the delayed launch – a launch that seems more like a trial of the system than a real launch of the service.
The carriers are spinning the NFC requirement as a security feature. According to Brad Duea, T-Mobile’s senior vice president of product management, NFC will allow carriers to erase all account data from a phone if it is lost or stolen – a feature that he claims isn’t available with other mobile payment options.
Given that every major mobile OS offers remote wipe capabilities of some sort, that seems a little bit weak as an argument for NFC, particularly in the context of Isis. In opting for NFC payments, many customers wanting to use Isis will need to upgrade to new smartphones with NFC support. A surge in upgrades to NFC-capable phones would, of course, be good business for the carriers involved in Isis.
Regardless of NFC and the delayed launch, a deal with MasterCard and Visa could see Isis-enabled payment systems deployed to a large range of merchants, though an upgrade to POS devices with NFC hardware would be needed to accept Isis payments.
That contrasts with PayPal’s recent deal with Discover that will bring PayPal to seven million merchants nationwide next spring. Unlike Isis and other NFC systems like Google Wallet, PayPal’s system will not be based on NFC, and merchants that accept Discover will gain the ability to process PayPal transactions via a simple software update to their POS systems.
PayPal’s system is also not directly based on mobile phones, though the company does offer an iPhone app that includes several account management and banking features, like the ability to deposit checks into a PayPal account using an image shot with the iPhone’s camera.
Whether or not Apple will join the NFC bandwagon with the next iPhone is an unknown question. ZDNet’s Jason O’Grady thinks that avoiding NFC could amount in Apple losing any hope of dominance in the mobile payment market. As we’ve speculated, however, Apple could achieve similar functionality using Bluetooth or a combination of location services and onscreen data like what Apple is providing with Passbook. Square, which recently signed a major deal with Starbucks, also eschews NFC.
It’s worth noting that there has been an ongoing discussion about NFC as a digital wallet technology for years at this point and yet a major network of NFC payment options has yet to emerge in North America.