State of the Union

US operators AT&T, Verizon and T-Mobile have created mobile wallet joint venture Isis, which is set to launch in the summer of 2012 in Austin, Texas and the Utah state capital, Salt Lake City. Jaymee Johnson, head of marketing for Isis, provides an overview of the group’s activities.

Q: What brought three competing operators together to form a mobile payments joint venture?

There was a recognition that, while the fundamental building  blocks for mobile commerce were in place, we were lacking the business system to pull a massively complex ecosystem together, and to do that at scale.

There are three elements that you need at scale. First is the consumer base, and with three of the four largest carriers we have 230 million customers in the US, which is 75 per cent of the market. Then we needed the banks and card issuers to come onboard. We’ve announced the first three—Chase, Capital One and Barclaycard—and they have more than 100 million cardholders, so they’ve got scale too.

The third element, which we’re working on now, is the merchant community. We recently announced that the four leading PoS terminal manufacturers in the US, Verifone, Ingenico, Vivotech and Equinox, are now including the Isis mobile commerce application in all of their terminals. Scale is important because it provides certainty to other players in the ecosystem.

Q: Is Isis focusing primarily on larger retailers?

We’ll be starting with the existing footprint of merchant acceptance, the ones that already have contactless solutions deployed. Beyond that we’re directly engaging with the tier-two and –three merchants through merchant acquirers, and also working at a very local level; coffee shops and dry cleaners. The idea is that consumer will be able to pay with their phone at the places they shop at on a daily basis—the every day spend verticals such as gas stations, grocery and convenience stores and pharmacies.

Q: Isis has adjusted its original strategy to deploy a payment network and now opted not to pursue interchange fees. Is this because the margins are too low?

Well, the per-swipe fee is low but there are a lot of transactions. But the banks are our customers. We provide a service to banks that allows them to securely provision and store their existing payment cards in the phone and we provide a customised and branded environment to those banks. It’s an extension of the existing relationship between the bank and the consumer and the banks pay us for that privilege.

Our second revenue stream is built around commerce events. We provide the ability for a merchant to deploy their loyalty programmes in the phones, to offer coupons and track the redemption of them. It’s much more like a direct response advertising model.

There is also a stored value element to the service. Why make this available if users are able to link Isis wallets to their bank accounts?

That does a couple of things for us. First there will be incentive dollars loaded onto that stored value account, so users can try the mobile wallet for free. The other useful thing about it is that it can be funded by any source. So if you bank at a small credit union or regional bank, which is not an Isis partner, here’s a way to tie that account into your mobile wallet.

Q: What device support does Isis have?

We will be supported on IOS, Android and Blackberry. And we have announced commitments and participation form six of the leading global OEMs, the biggest players in the world outside of Nokia and Apple. Those devices will be widely available when we hit market this summer.

Apple hasn’t committed to a timeline for NFC in the iPhone. So there is a sleeve provided by a third party that provides the NFC link through an external antenna.

Q: What learning has Isis taken from other mobile wallet projects around the world?

We were certainly aware of both what has been going on abroad and what hasn’t been going on abroad. NFC and mobile payments have been most successful in Asia, in markets that have some unique elements. They tend to be fairly concentrated so in Japan or South Korea, by virtue of one or two of the existing telecom providers leading the way, they were able to achieve the scale necessary for the industry to take off. So the importance of scale and magnitude is really at the heart of this collection of competitors coming together. There is no other way around it.

The other insight, and again this is true in Asia, was the importance of transit as another NFC use case. That is the reason we’re in Salt Lake City as one of our first markets. The existing Salt Lake transit system is system-wide, open loop contactless enabled. If you have a contactless bank card you can tap to ride. They’re the first in the US to have this, so it means you can do it with your phone too.

Q: Do you think that the Isis model is something that could be exported?

There are many initiatives around the world that are a collection of operators in one way or another. Europe is rife with them, there’s something in pretty much every market. Our focus is really on the US but fundamentally this is an industry that benefits from scale and the standardisation that comes from scale.

There are elements of the model that may be exportable, certainly technical standards around the handset, and around the point of sale interaction. Those are all exportable standards and it makes a lot of sense for the industry on a global basis to have a set of standards because it benefits everyone.