AT&T, Verizon and T-Mobile are reportedly downsizing plans for a joint near field communication (NFC) payment network called Isis and are looking to now partner with credit card companies Visa and MasterCard on a more modest mobile wallet offering. The move, reported by the Wall Street Journal, was prompted by the fact that the operators were in danger of falling behind other rival NFC efforts.
By turning to MasterCard and Visa, the operators are forgoing some of the money that could be made by directly handling transactions through contactless payments on a mobile phone. The shift underscores the eventual shake out that was bound to happen in the emerging NFC market. And it highlights the strength of traditional credit card companies, which are also pursuing their own NFC efforts and are jockeying for position in the larger mobile payments space.
Isis, as we noted at the original announcement in November, was challenged to begin with. The operators partnered with fourth-place Discover Card and with credit card issuer Barclaycard, which isn’t well-known in the U.S. The joint venture also said recently it wasn’t looking to roll out its first trial until well into 2012, which put it behind other NFC efforts taking place this year. The combination of a small payment processor and a slow timeline appears to have been too much to overcome for the operators, who are now looking at building a mobile wallet that can store credit card information.
Now, the carriers will have to find other ways to participate financially in the move to NFC payments, perhaps through revenue sharing with financial institutions that store payment credentials on a SIM card. Or they can try and make money by taking a cut of mobile marketing offers delivered to consumers. But increasingly it seems that the big credit card companies are going to a play a large role in NFC. Google, for instance, is reportedly working on a partnership with MasterCard and Citigroup to integrate NFC technology in Android devices. Research in Motion is also working on a trial with MasterCard to enable Bank of America customers to pay with their phones.
The battle is turning to who can own the customer, their personal data and their payment credentials. Google and RIM would like to store credentials right on the phone, many of which will get NFC chips. But the operators are hoping to be in the loop by getting the secure information on a SIM card. Potential challengers like Apple could also connect NFC chips to its iTunes system for payments. Whatever happens, it’s critical to be part of that direct relationship with the consumer, not just to take a cut of the transaction but to be part of the potentially larger opportunity in delivering personalized marketing offers to a user. It’s still early days in the NFC space but the latest turn of events highlights the challenges of going up against the credit card companies.