Weeks Away from Launch, Isis Announces Its First Batch of Merchants

For months, the carrier-backed Isis mobile-payments initiative could boast just one accepting merchant, the Utah Transit Authority in Salt Lake City, one of two cities it plans to launch its service in this summer. That changed on Tuesday with the announcement that Isis has signed some 50 retail companies both in Salt Lake City and in Austin, Texas, the other launch city.

The announcement also includes seven national companies such as Coca-Cola and Macy’s. Altogether, the announced merchants account for about 300 locations in the two launch cities.

Isis, which was formed late in 2010 by AT&T Mobility, T-Mobile USA, and Verizon Wireless, also said its backers’ stores will start selling mobile phones equipped with the Isis digital wallet in time for the summer launch, and will be among the accepting merchants. Isis’s wallet works with near-field communication, a short-range technology that rival mobile-payments services like Google Wallet also use.

Tuesday’s news follows the announcement last week that American Express Co. has agreed to allow its cards to be included in the Isis wallet. AmEx is the wallet’s fourth issuer, following Barclaycard U.S., Capital One Financial Corp., and JPMorgan Chase & Co. AmEx’s small-business, consumer, and Serve cards will be eligible for inclusion in the wallet, Isis said.

While the newly signed merchant locations will be accepting payments from Isis-equipped phones, not all of them will be capable of processing offers and rewards. An Isis service called “Smart Tap” will allow consumers to automatically receive offers and redeem rewards points when they wave or tap their phones to pay, but the service requires upgraded contactless terminals. Merchants that haven’t upgraded will be able to redeem offers via barcode scans, hot-key entry, or simple entry of a unique code, says Jim Stapleton, Isis’s chief sales officer. “We’re not saying you can’t play unless you go for the Cadillac of solutions,” he notes, referring to the Smart Tap alternatives as “show and go.”

Yet Smart Tap—and a similar service from competitor Google Inc.'s Google Wallet called SingleTap—could be crucial for the success of mobile-wallet ventures, as experts say merchants are seeking technologies that help them win and retain customers more than they are looking for new ways to let customers pay. Loyalty programs are also seen as important to drive consumer usage of the wallets. “The question is how they will encourage usage,” says Cherian Abraham, principal analyst at DropLabs, Richmond, Va., in an e-mail message commenting on the Isis merchant announcement. “And if merchant offers is what they are hoping to incentivize usage, then the density of those offers and their perceived quality will be what gets folks whip out their phones.”

Isis officials estimate that about 250 of the 300 initial merchant locations in Salt Lake City and Austin will be equipped for Smart Tap. In addition to this number, some 300 Coke machines in Austin will support Smart Tap, Stapleton says. The venture is also trying to get the technology built in as terminal makers turn out new devices. In March, Isis announced it had enlisted four manufacturers–VeriFone Systems Inc., Ingenico North America, ViVOtech Inc. and Equinox Payments, the U.S. operation of the former Hypercom Corp.—to make devices that support its technology. “Many reader manufacturers are now loading Smart Tap as standard,” Stapleton says. “We’re doing a lot of work with the supply chain.”

Isis has some distance to go to meet a goal, stated in February, of 1,000 merchant locations in each of the two test cities by the time its service launches. Still, some observers see the Isis merchant announcement lending momentum to the trend toward mobile wallets, particularly those tied to NFC. It comes a after last week’s news from MasterCard Inc. that the No. 2 card network will support a wide range of payment cards in its own digital wallet and will supply tools for developers to link their wallets to MasterCard’s contactless network. “”The next 12 months promises to be an exciting learning period for everyone–in particular buyers and sellers,” says Steve Mott, principal at BetterBuyDesign, a payments consultancy in Stamford, Conn.