October 16, 2013
There has been accelerated innovation in the payment enabling technologies, in recent years. NFC as one of the enabling technology has been moving much slower than expected, for payments. Despite the slow deployment of NFC infrastructure, ISIS program and its supporters are confident that NFC has huge promise. In a recent move, ISIS announced that it is going to launch their NFC based mobile app across the US within a few weeks. CEO of ISIS, Michael Abbot recently used his Money2020 conference keynote to make this public at the event held between 6th and 10th October 2013 in Las Vegas.
ISIS was established as a partnership between AT&T, T-Mobile and Verizon Wireless which boast over 200 Mn subscribers. The company has partnered with Chase and American Express. ISIS claims that one day, consumers will have access to 24 of top 100 retailers at around 1.3 Mn locations across the world. Some people started having doubts on the coalition after slower than expected rollout. In July this year, 9 months after the Isis mobile wallet launched in the three states of Austin, Texas, and Salt Lake City, usage among small merchants appeared to be low, despite considerable fanfare and promotion at the launch.
Michael Abbot however recently used his Money2020 keynote to present a demo of the new wallet app which was received with lukewarm response. He was confident that the re-designed app would be functional and would be launched within couple of weeks almost one year after initial launch last year. NFC-based ISIS app will work across most new Android phones, and Isis plans to support the iPhone via an NFC-capable case, plus iOS app that it will release in a couple of months from now.
Some of the industry observers are reluctant, such as the report from Keefe, Bruyette & Woods financial services. ISIS also had only 2 issuer institutions signed up – Chase and American Express. Capital One which was included in the partnership earlier had dropped out. Till July, Isis claimed 700+ merchant locations equipped to accept its wallet in the Austin area and another 850+ in and around Salt Lake City. But these were # of sites that had the readers enabled to accept contactless card payments. What was not known? how many transactions actually happened.
Abbot on the other hand maintained that the launch of ISIS Mobile app would overtake rival mobile payment systems such as offerings from PayPal. There will be 30 million Isis-capable NFC devices in the United States by the end of next year he said. The company plans to expand its offering nationwide now.
But there are some concerns about the business model adopted by ISIS. If you have been following NFC in the payments space, you would know that the technology has been having a hard time. Google Wallet changing track to include non-NFC phones and the exclusion of NFC from iPhone 5s have not gone in favor of NFC technology.
When Google Wallet was initially (NFC dependent) launched in May 2011, the app allowed consumers to make purchases at more than 200,000 PayPass and MasterCard terminals. Google’s efforts in the space were partially blocked by the carriers AT&T, Verizon and T-Mobile in a bid to commit to ISIS.
Consumers lack of comfort with using NFC technology is another issue. 'Issuers must pay each time a consumer loads their card onto the wallet. The caveat is that whether or not a consumer uses the card, the issuer must pay to have it in the Isis Wallet. Card issuers are interested in encouraging card spend whereas Isis is purely interested in getting consumers to link their cards to the wallet. This conflict of interest will continue to be problematic said Yankee Group analyst Jordan McKee. Why aren’t (credit card) issuers rushing to be an Isis partner if that value proposition is allegedly so strong? he asked.
LTP View: With 75% of the smartphone subscriber market owned by Verizon, AT&T and T-Mobile, ISIS Wallet app has significant potential (there is no crystal ball) to see faster adoption rate. The NFC based mobile app offers similar features as other Wallet apps such as allowing consumers to make payments, pull up loyalty cards at checkout, follow their favorite brands for offers etc. Consumers can top up cards through adding funds, pay merchants and send money to other users. If the phone is lost, the bank can put it out of service and bring it back on if it is recovered.