Rather than scaling back on its plans for a near field communication (NFC) payment network, the Isis joint venture said it’s ramping up. Contrary to reports of downsizing its ambitions, a picture that emerged from a recent Wall Street Journal article , Verizon, AT&T and T-Mobile are accelerating and expanding their efforts, an Isis spokesman told me.
This isn’t surprising. Of course the carriers don’t want to sound like they’re stepping back. The idea is now to be more broad and welcome a host of credit card companies and banks, which Isis believes will make its payment offering more effective. But what I found interesting with my talk with Jaymee Johnson, Isis’ head of marketing, was how the carriers feel this change will make them more critical to the success of NFC.
Johnson said Isis was initially launched last fall with the intention of creating a new payment network that rode on a white-labeled service from Discover, with Barclaycard as a card issuing partner. But Johnson said after receiving a lot of interest from payment and financial companies that wanted to be involved in Isis, the principal partners decided to open up and migrate away from a separate network to one that embraces credit card companies and card-issuing banks. This might have come from some pressure from credit card companies, or it might be retailers and merchants showed little interest in working with Discover, a fourth-place credit card company in the U.S.
But with this new, more open stance, said Johnson, Isis in the position to tie NFC together and make it more successful. Rather than taking a backseat, it seems like the carriers feel they’re in a position to help drive the adoption of NFC. Johnson said while NFC trials have helped validate the technology and consumer interest, there needs to be an entity bringing together the interests of the financial community, retailers and the mobile industry.
“Because payments is ultimately a scale business, you need a way for a bank to move millions of card relationships to a wide diversity of phones, on multiple operating systems,” Johnson said. “There needs to be some way to manage that complexity. While trials to date have been useful to establish that the technology works, it illustrates the need for an open platform between the financial services community and the mobile industry. That’s precisely what Isis is providing.”
Johnson couldn’t share the names of any new credit card companies or banking partners who are signing on with Isis. But the idea is that Isis will create a digital wallet that card-issuing banks could easily have their customers tie their accounts into. Consumers would interface with Isis through a mobile app, which would give them access to multiple credit and debit accounts. Retailers could be able to participate by offering targeted offers to loyalty members through Isis, while product companies and brands could also offer discounts to customers who opt-in. If done well, Johnson said it can create more commerce and potentially more money for the carriers than if they went with their own network.
Isis, Johnson said, is also in a key position to bring some clarity to NFC because the three carrier partners buy most of the phones sold in the U.S. and will be able to help settle the question about where the financial credentials reside. Operators want it on a SIM card, while manufacturers would like it embedded in the phone. Visa last year also tested embedding NFC technology in an SD card. It sounds like the carriers will likely flex their muscles on this issue. But it could clear up some of the uncertainty and help move NFC forward.
Unfortunately, with the change in direction, Isis hasn’t moved up its time-table. It’s still committed to debuting the system in Utah in early to mid-2012. That means if Isis is going to play a key role in NFC, the technology won’t get going for another year. Johnson said, however, it will take that long before you start to see NFC embedded in a lot of phones.
Now, again, this news can simply be a lot of spin by the carriers, who need to explain why the Isis business model is changing. But I do think Johnson has a point in suggesting the operators can help drive NFC. They need to be there, or they risk losing out on a lot of money to be had in payments and in directing marketing offers to consumers. And with the combined strength of Verizon, AT&T, and T-Mobile, they have the ability to make some progress if they execute well and get on board with other players in the industry.
The reality is there are a lot of issues ahead for NFC. A great majority of businesses are not set up for NFC and will have to be convinced it’s worth accelerating their hardware upgrade cycle to get NFC point-of-sale terminals. Consumers also have to be convinced there’s a point to adopting NFC. But now that the telcos are more aligned with payment processors, at least here in the U.S., it may create even more momentum behind NFC.
“We heard they were trying to create a payment network to compete with us and we thought that was the wrong direction,” said MasterCard’s James Anderson, VP in charge of mobile and Paypass. “Now that they’ve changed their minds, we want to work with them in a constructive venture. Isis is a way to deliver critical mass with their ecosystem.”
It still remains to be seen if the operators will actually be at the wheel driving this effort, especially with the credit card companies playing such a large role. But it sounds like they’re ready to cooperate more broadly, and that means a better shot for NFC to move forward smoothly.