With Signed Merchants Onboard, Isis Looks at Transit, Fast Food, Groceries

The new Isis mobile-payments venture has recruited some merchants as it builds the acceptance side of its network, the Isis executive overseeing the merchant effort said on Wednesday.

“We do have signed merchants at this point,” Jim Stapleton, head of sales and account management at Isis and a veteran of AT&T Inc., tells Digital Transactions News. Stapleton, however, refuses to identify them, saying announcements would be made when the merchants and Isis are ready.

Isis, perhaps the most anticipated new payments company besides Square Inc., is a joint venture of mobile carriers AT&T Mobility, Verizon Wireless, and T-Mobile USA. Transactions will flow on Discover Financial Services’ payment network and Barclaycard, the U.S. credit card unit of London-based Barclays Bank plc, will initially offer consumers Isis accounts. Isis unveiled its plans three months ago to offer contactless mobile-phone payments based on near-field communication (NFC) technology but has revealed few specifics so far (Digital Transactions News, Nov. 16, 2010). Its electronic wallet will support credit, debit, and prepaid transactions.

The venture is looking at transit systems, quick-service restaurants, coffee shops, grocery stores, parking providers, and other merchants that generate frequent transactions as businesses that naturally would be interested in its system. Stapleton, a keynote speaker Wednesday at the Smart Card Alliance’s 2011 Mobile and Transit Payments Summit in Salt Lake City, told the audience consumers won’t have to pay to make their handsets capable of making Isis transactions. “There will be no charge to the consumer,” he said.

Also, while Barclaycard is the first partner to manage Isis accounts, it likely won’t be the only one. “We are open to working with all card issuers,” Stapleton said. Isis also could open its system to other telecommunications carriers.

In addition, Stapleton said the company is interested in integrating its system so that Isis-enabled smart phones could pay contactless fares on transit systems that currently use closed-loop, or proprietary, fare cards. Transit is the only merchant category that generates twice-daily transactions, Stapleton noted. Isis also is looking at adding capabilities to handle private-label retail cards and gift cards.

Stapleton didn’t mention merchant pricing, but making the service cost-competitive with card payments will be critical. In November, sources told Digital Transactions News that merchants turned thumbs down on the joint venture’s first pricing plan. Stapleton acknowledged the importance of merchant adoption if Isis hopes to attract consumers. “Clearly merchants are our critical audience for this,” he said, noting that merchants told him they didn’t want an AT&T-only solution even though AT&T has 30% of wireless subscribers.

Isis seems to recognize that its top challenge is on the merchant side, according to Todd Ablowitz, president of Centennial, Colo.-based consultancy Double Diamond Group. An open wallet including merchant-provided accounts could be critical, many observers note. “It’s clear that Isis is seeing the future that many of us in the industry see, that an open wallet with a multitude of payment options is the way to obtain fast and wide adoption,” he says.

For consumers, the Isis wallet will likely offer a menu of marketing-related services such as electronic coupons, loyalty programs, and ticketing. “It has to be sexy,” said Sarab Sokhey, a Verizon Wireless non-payment NFC executive and advisor to Isis who spoke on a conference panel. “Payments alone is not going to cut it.” Verizon, as it evaluates mobile payments, is interested in couponing and acceptance markets such as transit and even health care, he said.

NFC is an interactive, short-range protocol that allows mobile phones to make contactless transactions. Its high-powered chip is regarded by many as superior to the contactless chips already in more than 100 million U.S. payment cards, but rolling out NFC payments for mobile phones won’t be cheap or easy. Equipping a handset with NFC capabilities would cost $3, and integration costs could double the expense, said George Peabody, emerging technologies researcher at Mercator Advisory Group Inc. Then there would the cost for terminals, including NFC upgrade expenses for merchants that bought terminals to read existing contactless cards. Plus, standards don’t exist for accessing NFC chipsets, he said.

Still, most observers agree NFC is coming whether or not it is harnessed for payments. Mercator forecasts that 40 million NFC-equipped handsets will be sold in North America this year.