The ISIS Mobile Wallet: Are Visa, MasterCard and PayPal Under Siege?


Posted by Bob Egan

The answer to Capital One’s question: “What’s in your wallet?” may be “nothing” in the next few years.

Three major U.S. mobile operators have created a joint venture known as ISIS, which intends to build a mobile payment solution that will allow consumers to make purchases at retail stores with just a wave of a mobile phone at the checkout counter. The founding members of the JV include AT&T, T-Mobile and Verizon Wireless.

In a recent speech about mobile payments to a large group of bank executives, I predicted that banks are going to start feeling like a herd of Caribou surrounded by some very hungry wolves. Between their somewhat lackluster mobile banking offers and the absent of real innovation in payments, announcements like this one, should bring a certain reality about my prediction.

While the concept and hype surround mobile payments is not new, the ISIS venture has a modicum of credibility for a number of reasons including its top management spot. The JV announced that the very capable Michael Abbott, a former executive at GE Capital, as its CEO. The group fills another void seldom seen in other initiatives – a top payment rail. Isis is working with Discover Financial Services’ payment network that has over 200 million customers and is accepted at over 7 million locations worldwide.

The group is just getting started and there is an indication that ISIS will open up its “PayWithThis” solution to other carriers, banks and merchants. They must.

To be sure, the ISIS is not without competition. Visa working with companies like Monitise and Device Fidelity, MasterCard, First Data working with VivoTech and mFoundry, PayPal with Bling Nation, the ever present Obopay, handset manufactures Nokia and Samsung, and a crowded group of VC backed wananbe’s all of whom are making significant investments into alternative and mobile payment schemes.

Will 2011 be the year of mobile payments? No. It will be the year of more noise – a lot more noise. While more than 230K stores support another form of mobile payments called contactless, the consumer use rate is still far less than 10% of all transactions. Including those transactions below $25.00.

Several technologies, provisioning and business model issues remain before mobile payments will find its way into the consumer mainstream. The technology ecosystem is already fragmented and likely to be made worse before it gets better. Business models remain largely elusive as most participants continue to argue about the one of the components in existing card payment business models called interchange – instead they should focus on retiring the todays four party model of issuer, acquirer, merchant and processor.

To me it’s quite clear the ISIS is taking matters into its own hands. I predict we will see ISIS become the issuer behind new carrier partner plastic credit/debit and prepaid cards in addition to mobile wallet capabilities for those cards become resident as applications on mobile phones.

So what do you think? Is ISIS the real deal? Who else is likely to mount a significant challenge?

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