November 18, 2010

As we have noted in earlier stories, telecom carriers AT&T Mobility, T-Mobile USA and Verizon Wireless have formed a joint venture that will create a national mobile payment network. It is named after the Egyptian goddess Isis.

Isis plans to create a network in which near-field communication-equipped mobile phones will be used to make point-of-sale purchases. The carriers intend "to deliver new levels of competition and value to consumers and merchants," according to a press release, and they expect to introduce their service during the next 18 months.

Some bankers look at this new venture with a wary eye because of reports that it plans to circumnavigate the traditional Visa and MasterCard credit and debit card networks. One banker told us yesterday, "The ISIS project is a great concern because of the implication that this would get away from the credit card rails to process payments." Indeed, Michael Abbott, Isis' CEO, told Reuters on Tuesday, "'We're a competitive alternative' to Visa and MasterCard."

But Gwenn Bezard, co-founder and research director at Aite Group who has spoken to Abbott (the company has not yet responded to our requests for an interview) feels banks should not see this as a threat. "The carriers are not trying to circumvent Visa and MasterCard," he says. "They're starting with Discover and Barclays, and in the conversations I have had with them, they have been open to working with other banks and networks. If Visa wants to take advantage of that, they may. This will be open to all networks and banks."

Bezard, who expects the mobile payment market to reach $214 billion by 2015, believes banks will have a significant role in that market. "Whatever the carriers are doing, ultimately banks will have to be involved," he says.

Bezard describes Isis' solution as a "mobile wallet" that makes use of NFC chips that handset manufacturers are increasingly installing within their phones. "Within the wallet you'll be able to put payment cards, loyalty cards, coupons, and other payment options," he says. The devil will be in the details, he notes, especially pricing that could put merchants or banks off.

"If I were in the shoes of a major bank today, I would be considering how to work with the joint venture set up by carriers and with other payment providers," he says.

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