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AT&T, T-Mobile, Verizon form joint venture to power contactless mobile payments nationwide

November 17, 2010

Three of the top four U.S. carriers team up to launch the Isis mobile commerce network

Three of the top four U.S. carriers team up to launch the Isis mobile commerce network

AT&T Mobility, T-Mobile USA and Verizon Wireless have formed a joint venture called Isis, a national mobile commerce network that will let consumers use their mobile phones to make point-of-sale purchases.

The initial focus of Isis will be on building a mobile payment network using smartphone and near field communication (NFC) technology to streamline the payments process for consumers and merchants. Isis expects to introduce its service in key geographic markets during the next 18 months.

“The news of the day is the formation of the joint venture, which from our standpoint is so important for the catalyzation of the mobile commerce industry,” said Jaymee Johnson, spokesman for Isis, New York. “In the mobile payments industry, there hasn’t been a technology hurdle, it has been an ecosystem issue that has caused the failure to launch at scale.

“We are bringing 200 million consumers to the merchant community, and for merchants, it’s important that this is not a card on a phone,” he said. “We’re tackling everything that is in your leather wallet, driving a simpler user experience into consumers’ handsets.

“We have a network of pretty strange bedfellows, but it was the merchants that brought us together—they said ‘We can’t have a fragmented ecosystem—we need scale,’ and we realized that we need a common platform to drive scale for consumers and merchants and create an ecosystem that is necessary to drive the rest of the market.”

The Isis mobile commerce network will be available to all merchants, banks and mobile carriers.

Michael Abbott, formerly with GE Capital, has been named as chief executive officer of Isis.

Mr. Abbott said in a statement that the Isis mobile commerce network, through relationships with merchants, will provide an enhanced, more convenient, more personalized shopping experience for consumers.

While mobile payments will be at the core of the Isis offering, the company plans to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes, per Mr. Abbott.

Isis to create scale
Founding members AT&T, T-Mobile and Verizon collectively provide wireless services to more than 200 million consumers, all of whom will have access to the Isis service.

Isis is working with Discover Financial Services’ payment network, currently accepted at more than 7 million merchant locations nationwide, to develop an extensive mobile payment infrastructure for the joint venture.

Barclaycard US, part of Barclays PLC, is expected to be the first issuer on the network, offering multiple mobile payment products to meet the needs of customers.

In the beginning, Isis intends to use Discover’s national payment infrastructure, as well as Barclaycard’s expertise in contactless and mobile payments.

Initially, Isis mobile payments will appear on customers’ Barclaycard bank account statement, not their mobile phone bill.

Moving forward, Isis will be available to all interested merchants, banks and mobile carriers.

“Discover is providing the core infrastructure of the payment service for the processing and clearance,” Mr. Johnson said. “What we’re building on top of that is all of the mobile interactivity, the ability with a single tap to walk through a line and pay, present loyalty credentials, redeem coupons and offers and get a mobile receipt back listing what you’ve purchased.

“All of that happens with a single tap,” he said. “We’re moving from a paper-based system to a digital system.”

The new joint venture will enable contactless mobile payment and commerce services using NFC technology.

NFC uses short-range, high-frequency wireless technology to enable the encrypted exchange of information between devices at a short distance.

Isis claims that the new system is being designed and built to include security and privacy safeguards.

There is potential for this joint venture, if executed properly, to be the tipping point for contactless mobile payments many have been waiting for with baited breath.

“This long-awaited announcement by the mobile carriers is a very significant event in the still-nascent U.S. mobile contactless payments space,” said Red Gillen, senior analyst at Celent, San Francisco. “It kicks off mobile carriers’ forays into this space, and given what appears to be a model that collaborates with banks and likely retailers, marks a major new competitor for Visa and MasterCard.

“However, the devil is in the details, and the joint venture consists of rivals who are not known for working well with each other,” he said. “There’s still a lot of work to be done, but the announcement certainly pushes mobile payments closer to being a reality.”

Can the various stakeholders play nice and get along? How will the revenue sharing work? Which merchants will participate initially?

The official announcement of the joint venture leaves many unanswered questions.

If nothing else, it will put contactless mobile payments on the radar of more consumers and retailers.

In the best-case scenario, it will either create a cross-carrier standard or encourage competitors to step up their game and bring contactless mobile payments into the mainstream.

“The new carrier venture is yet another example of the increasing momentum around mobile payments and NFC in particular,” said Drew Sievers, cofounder/CEO of mFoundry, SanFrancisco.

“While there isn’t much in the way of detail around the announcement, I think the payment ecosystem will welcome the carrier efforts, particularly if they offer a secure, cost-effective solution for banks and merchants,” he said.

State of the industry
What is Isis and what will it mean for the mobile commerce ecosystem? The announcement was pretty vague in certain areas, and there are many things that are left up to interpretation.

Pricing, carrier markups and product categories are all open questions.

That said, mobile payments as a category are growing healthily, and Isis proves that carriers are determined to fit into the mix.

“Generally, mobile payments is a gating factor to lots of parallel areas of development in mobile,” said Michael Boland, senior analyst and program director at BIA/Kelsey, San Francisco. “Once mobile payments reach a certain level of consumer ease and ubiquity, we’ll see the promise of mobile really start to come through.

“In other words, mobile payments will unlock the potential around gaming, social media, location-based services and all of the other hot areas of mobile that we’re hearing about so much today,” he said.

This will happen by closing the loop on finished transactions and micropayments for all kinds of product categories including local commerce such as reserving a restaurant table or a flat screen TV, per Mr. Boland.

That finished transaction will likewise appeal to lots of marketers that wish to get concrete analytics about how their ad spends or “presence” on mobile has produced ROI—in this case, involving real conversions.

Carriers are in a good spot to do this because of their existing billing relationships with consumers.

“The problem so far is that their exorbitant markups on mobile payments have all but debilitated consumer and merchant adoption,” Mr. Boland said. “Adoption will happen—it’s just a matter of time.

“It will require lowered barriers to adoption, including reasonable markups from intermediaries,” he said. “It will also require the ease that comes with existing billing relationships such as carriers, credit card companies or well-positioned dark horses like Apple via iTunes.

“Developments on the technology side will also make mobile payments more appealing and easier to adopt, including near field communications.”

Final Take
Dan Butcher, associate editor, Mobile Commerce Daily

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Dan Butcher is associate editor on Mobile Commerce Daily and Mobile Marketer. Reach him at

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