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Isis wireless carriers back off separate mobile payment network

Matt Hamblen, Computerworld | May 4, 2011
Isis, a consortium of three major U.S. wireless carriers, has reportedly decided to back off plans to develop a separate mobile payment network and will instead work within traditional systems that rely on major credit card companies Visa and MasterCard to handle mobile transactions.

Isis, a consortium of three major U.S. wireless carriers, has reportedly decided to back off plans to develop a new, separate mobile payment network and will instead work within traditional systems that rely on major credit card companies like Visa and MasterCard to process mobile transactions.

The carriers in Isis -- AT&T, Verizon Wireless and T-Mobile USA -- will still move ahead with a pilot test planned for 2012 in Salt Lake City of a system using near field communication (NFC) technology inside smartphones. And Isis will continue to work with Discover Financial Services, a smaller credit card processor, and Barclaycard U.S., but not exclusively as before, according to unnamed sources cited by the Wall Street Journal.

Isis officials did not respond to a request for comment.

Isis' change in direction is an acknowledgement that setting up a mobile payment system is much more challenging than putting NFC chips in smartphones and installing NFC reader terminals in stores and in public transit stations, at least in the U.S., analysts said. In its original plan, Isis wanted payments that people made with smartphones to be made to the carriers rather than to banks. However, U.S. consumers are accustomed to having their payments handled by companies like Visa, which processes payments for many of the largest U.S. banks and whose cards account for more than half of all U.S. credit and debit card transactions.

"The wireless phone companies are never going to own the customers, especially when it comes to payments," said Gartner analyst Avivah Litan in reaction to the Isis news. "Consumers will never change from banks to phone companies for payments, and this development is clearly an indication of that."

Mark Hung, another Gartner analyst, said the Isis move had been rumored for a while and makes a good deal of sense. "Different players in the new NFC ecosystem clearly want to make NFC payments work on the smartphone, and they want to make sure that it's widely adopted without any splintering at the outset," he said. "Isis very quickly understood that, despite having the support of three of the top four carriers in the U.S." (Hung said Sprint was also included originally but backed out over concerns about the costs involved.)

What Isis realized is that "carriers aren't the best payment processors ... and Visa and MasterCard are much more recognizable brands than 'Pay With Isis,'" he said. Isis reached out not only to Visa and MasterCard, but also to banks other than Barclays, including Citibank, which has already run NFC trials globally.

 

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