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Summary:

Capital One says it has the data it needs and is withdrawing from Isis, the mobile carriers’ NFC-based mobile payments effort. If banks are losing faith in Isis, that’s a bad sign for its future prospects.

Isis
photo: Isis

Capital One is dropping out of Isis’s mobile payments pilot project, according to a report from NFC World, casting a pall over the carrier-driven initiative to turn the mobile phone into a universal digital wallet.

Capital One told NFC World it’s pulling out because it has gotten the data it wanted from the trials, and it even held out the possibility of working with Isis again in the future. But its departure could mean that the banks are losing faith that Isis can really succeed with its nationwide launch of a near-field communications-powered mobile payments network. The pilot participants in Austin and Salt Lake City are the seed customer base for any future large-scale launch. It doesn’t make sense for Capital One to yank support for its credit and debit cards on Isis only to restore it later this year when the pilot goes nationwide.

Capital One was just one of the four financial institutions (the others are American Express, Chase and BarkleyCard) that signed onto the Isis trials in last year, so pilot participants still have other banking options when Capital One withdraws. But the initiative seems to have little momentum.

After delays, Isis launched its commercial trial in October, and this summer it finally revealed plans to expand nationwide by the end of the year. Meanwhile, the NFC chips critical to powering Isis transactions have made it into relatively few phones, and the mobile industry is looking for alternatives to NFC as a point-of-sale mobile payments technology. PayPal and Square don’t rely on NFC in their mobile wallets, while Apple has shunned the technology entirely. Instead it’s launched in iOS7 a feature called iBeacon, which uses Bluetooth Low Energy to power proximity-based transactions.

Google is still backing NFC, but its attempts to promote Google Wallet have been confounded by the Verizon Wireless, AT&T and T-Mobile — the carriers backing Isis. While Google this week announced support for Wallet features on all Android 2.3-or-higher phones, its core mobile payments service is still severely limited by the ban on competing NFC transactions from the Isis carriers.

Whatever potential NFC had as a financial transaction tool is dwindling quickly because of this war between industry heavyweights. Even though there are NFC phones in the market, it’s now nearly impossible to make a point-of-sale payment using one. Capital One could have decided it was time to withdraw its bet on what is clearly a losing horse.

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  1. Compared to Google Wallet ISIS is a monumental failure. The carriers should pull the plug on ISIS before they embarrass themselves even more. I’ve been using Google Wallet at Rite Aid and McDonald’s for months.

  2. There is a fundamental issue with ISIS’ model based on NFC where all it does is putting the card credentials in a different form factor (mobile phone) while still driving the transactions through the same debit/credit card rails. NFC is largely viewed by the retailers as a way for the payment schemes and banks to push the card model into mobile payments and therefore maintain the existing interchange model which is too expensive for small payments – the very type of payments that consumers naturally make with mobile phone form factor due to its inherent convenience. This is where low adoption of NFC at POS comes from. So, on top of the underlying cost of debit/credit card transactions that is high to begin with for everyday payments, there is a need to provide revenue for ISIS.

    New entrants are exploring different processing and business models and using other technologies such as QR code to go around the NFC issue described above. There is a lot of activity in this area and new solutions offering much lower cost are being launched. In this environment NFC is unlikely to gain any significant momentum so ISIS will likely fail unless they radically review/revise their model.

    1. > In this environment NFC is unlikely to gain any significant momentum so ISIS will likely fail unless they radically review/revise their model.

      Or unless they just get the hell out of the way and let Google get things done.

  3. Time to let isis go before they completely doom nfc!

    Here’s the problem, isis only works on a few select phones with a very few select cards. Duh!

  4. > Even though there are NFC phones in the market, it’s now nearly impossible to make a point-of-sale payment using one.

    Except that there are hundreds of thousands of point-of-sale terminals across the United States–at gas stations, in drugstores, department stores, restaurants, cafes, and so forth–that all support MasterCard PayPass. Any of these terminals will work with Google Wallet.

  5. Hi Steven,

    Theoretically they will, but Google Wallet is blocked on three of the four nationwide operators including the two largest. That’s why I say it’s nearly impossible. The technology is there (at least the beginnings of it). The will to cooperate to actually use that technology is not. Basically the industry is holding NFC payments hostage in order to get Isis off the ground — and Isis doesn’t appear to be going anywhere.

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