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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.
April 5
Banks were skeptical of the Isis mobile payments joint venture when the wireless carriers leading it announced it last year, but Isis says it has quieted its skeptics and is now working closely with the major banks and payments companies.
Isis initially had just two financial institution partners on board — an issuer, Barclays PLC, and a card network, Discover Financial Services — and with those partners alone it seemed to have all it needed to set up its own payments system around mobile phones. But as the venture gears up for its first major test next year, it has said it would be open to additional partners, and banks are starting to take notice.
"We sort of find ourselves in a conversation where the banks are saying, 'We understand the legitimacy of what you guys are up to, we see the commitment from the carriers,' and there's a feeling of inevitability about this," Isis' chief marketing officer, Ryan Hughes, said in an interview last week.
Hughes declined to name the banks that Isis has met with or to say whether any have indicated they would enable their customers to load their credit and debit cards into the mobile wallet service the joint venture is developing.
Isis is a venture of AT&T Inc., T-Mobile USA and Verizon Wireless.
When the carriers unveiled the service in November, they pitched it as an alternative network of sorts to Visa, MasterCard and American Express. The plan was to issue Isis-branded payment accounts through Barclaycard, a subsidiary of Barclays, and route transactions over Discover's payment network.
Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., three of the largest credit and debit card issuers that are involved in their own mobile payments trials, declined to comment on Isis, as did Visa Inc. and MasterCard Inc.
Hughes also would not name the merchants Isis has talked to but said that its goal is to help facilitate loyalty, coupon and other services designed to enhance basic transactions for them and their customers.
Hughes stressed that Isis is taking an "open" approach to working with multiple banks and payment networks. Richard Crone, a payments consultant, said he doubts that many banks will bite.
"The bankers have seen this movie before," Crone said. "It's the adoption of a new intermediary."
Isis plans to offer default payment accounts to customers that do not have accounts with its bank partners, but Crone said he doubted banks would be willing to allow their customers' payment credentials to be loaded into Isis' mobile wallet service.
Many banks are testing mobile payments services using external memory cards that contain a consumer's payment information and a near-field communication antenna and plug into existing handsets. This method can work with many of the phones in use today, but Hughes said that Isis, which will rely mobile phones with a built-in NFC chip, ultimately will provide a more robust experience for consumers, banks and merchants.
Charles Golvin, a principal analyst with Forrester Research Inc., said that, while concerns over who owns the customer relationship in a carrier-led service will likely persist for banks, he believes banks "will come to the table and make peace with this."
"I don't know what the straw is that breaks the camel's back, if you will," but "seeing the operators move with the payment capability on mobile phones" alongside any consumer adoption could help bring banks to the table, Golvin said.
