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Discover Financial Services is building its contactless payment capabilities as a segue to mobile payments.
December 16 -
For a handful of pioneers, the mobile payments revolution needn't wait for questions about hardware to be resolved. Not when so much is possible with software innovations on existing phones.
November 24 -
Recent developments suggest 2011 will be the year that mobile payments take hold in the U.S. in a big way. But identifying which business model will lead the industry isn't easy.
November 16 -
AT&T, T-Mobile and Verizon on Tuesday unveiled ISIS, their long-awaited mobile payments joint venture that will route contactless transactions over Discover's network.
November 16
The mobile payment venture Isis is shaping its first major test around a lesson banks have learned with contactless payments: To change the way consumers pay, a payment system should change the way they pay to get to work.
To this end, Isis, formed by major U.S. wireless carriers, has announced its plans for a 2012 pilot program involving the Utah Transit Authority's system in Salt Lake City. It is also planning to open up its system to other issuers and networks besides its launch participants, Barclays PLC and Discover Financial Services.
The Isis approach echoes that of Oyster, Transport for London's contactless payment card, which can also be used at a limited number of merchants tied to the transit system. It also resembles an approach by MasterCard Inc. and Citigroup Inc. in a trial conducted in New York, where open-loop cards, including those from rival Visa Inc., could be used for subway fare underground and purchases at retailers above ground.
Clair Fiet, the Utah Transit Authority's chief of business solutions and technology, said Isis takes this model a step further by incorporating mobile. One of the advantages of using mobile is that it can provide loyalty benefits, such as instant coupons, to further encourage commuters to use the same payment method at the end of their travels.
In this regard, Isis, the system created by AT&T Inc., Verizon Wireless and T-Mobile USA, is "not just the mobile" wow factor, Fiet said. "Once you ride so many times, you can [receive] a coupon for one of the merchants along our line," Fiet said.
Ryan Hughes, head of marketing at Isis, said, "Transit … drew us to Utah."
Other considerations in its choice of Salt Lake City were "the demographic makeup, the smartphone penetration [and] the commuter profile," Hughes said.
The Utah Transit Authority plans to allow fares to be purchased from Isis-enabled mobile phones systemwide by mid-2012. The transit agency has allowed fare purchases from contactless cards since 2009.
In its effort to encourage mobile payments to continue after the commute, Isis is talking with regional merchant acquirers and independent sales organizations.
"We need to be able to overload a market," Hughes said. "Our solution needs to be ubiquitous, across the board." To succeed, "we … need Utah and the Salt Lake City merchants," he said.
Opening the network to other payment networks and issuers is another way the Isis pilot program resembles the MasterCard-Citi trial in New York.
Discover said that its mobile payment strategy goes beyond Isis, so it is not threatened by the addition of other players.
"While Isis remains a key component of our mobile strategy, we are far more interested in the widespread adoption of mobile commerce than we are in the success of any single initiative," Discover said in an emailed statement. "[We] fully intend to participate in multiple wallets as both an issuer and network."
Isis' other launch partner, Barclays, is already deeply involved with London's Oyster system. It issues a contactless card that combines with London's Oyster card. A Barclays spokesman did not respond to a request for comment Tuesday.
Barclays' card expands the functionality of the Oyster card by allowing it to be used for payments at any merchant that accepts contactless payments.
"The most important thing on a card system is that you have acceptance points," said Brian Riley, a research director in the bank card practice at TowerGroup.
Cathleen Conforti, MasterCard's senior vice president for global PayPass solutions, said that although working with a transit system has its benefits, it also comes with challenges. A new payment system must be able to accommodate "time-based [fares], pay as you go, senior citizen discounts, student rates, things like that — being able to accept transfers," Conforti said. It must do this without adding delay to the process of going through a turnstile, she said.
MasterCard's system in New York allows users to choose unlimited time-based fare options from a website. For those who have not enrolled online, the system works on a pay-as-you-go basis. It aggregates payments so as not to delay commuters at the turnstile by forcing them to wait for a payment to be authorized.
