UPDATE: September 3, 2014
-- The company behind Isis Wallet has officially changed its name to Softcard. CEO Michael Abbot explained in a blog post that the company is rebranding itself because “however coincidental, we have no desire to share a name" with the extremist group responsible for the vicious campaign of violence in Syria and Iraq. The company had announced in July that it was looking for a new name to avoid association with the violent Islamic militant group.
Our original story from November 2010 continues below.
Competing wireless carriers are coming together for a common cause: Mobile commerce. AT&T Mobility, T-Mobile USA, and Verizon Wireless on Tuesday announced a joint venture to build a national mobile-payments network.
Dubbed Isis, the initial focus of the group is to build a mobile-payment network that uses mobile phones to make point-of-sale purchases. By tapping into a combination of smartphone and Near Field Communication (NFC) technology, Isis is essentially setting out to modernize payments.
"Our mobile-commerce network, through relationships with merchants, will provide an enhanced, more convenient, more personalized shopping experience for consumers," said Michael Abbott, CEO of Isis. He is the former CMO of General Electric's GE Capital group.
"While mobile payments will be at the core of our offering, it is only the start," Abbott added. "We plan 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."
Together, Isis' founding members provide wireless services to more than 200 million consumers. When complete, those customers will have the opportunity to use a mobile-payment network undergirded by Discover Financial Services. Barclaycard U.S. is expected to be the first issuer on the network, offering multiple mobile-payment products.
"We believe the venture will have the scope and scale necessary to introduce mobile commerce on a broad basis. In the beginning, we intend to fully utilize Discover's national payment infrastructure as well as Barclaycard's expertise in contact-less and mobile payments," Abbott said. "Moving forward, Isis will be available to all interested merchants, banks and mobile carriers."
Visa and MasterCard are building their own mobile-payment networks. And American Express is the brains behind Sprint Nextel's prepaid wireless strategy.
Here's how it works: NFC uses short-range, high-frequency wireless technology to make way for the encrypted exchange of information between devices at a short distance. The system is being designed and built to include strong security and privacy safeguards. Customers will use smartphones as a credit card by tapping into the network wirelessly.
Alternative Payment Solutions
Isis aims to deliver this service in major markets in about 18 months. But there are already alternative solutions to the mobile-payment challenge. One upstart is called Square, which offers a smartphone app and a small piece of free hardware that plugs into a phone. The hardware swipes the credit card and charges $2.75 plus 15 cents for a swipe, or 3.5 percent plus 15 cents for a keyed-in credit-card entry.
With Square, there are no contracts, no set-up fees, no monthly fees, and no monthly minimums. It has served as an alternative to payment gateways that charge higher fees.
With Isis, retailers could tap into the same kind of program -- but how successful the project will be depends, in part, on the fee structure, said Michael Disabato, managing vice president of network and telecom at Gartner.
"If vendors are only paying 3.5 percent for these transactions, it will get some attention. It's all in the money. Right now, the carriers aren't taking a percentage. They are getting your bandwidth cost. This is where they are going with it," Disabato said. "If AT&T, T-Mobile and Verizon are successful with this, American Express and the others are going to have to get on board."