December 15, 2011

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Isis, the mobile payments venture formed by AT&T Mobility, T-Mobile USA and Verizon Wireless, announced the selection of digital security firm Gemalto to secure its mobile commerce platform as it gears up towards a 2012 rollout.

The consortium has also forged partnerships with Visa, MasterCard, Discover and American Express and will use a technology known as near-field communication (NFC) to allow customers to make point-of-sale purchases by waving their smartphones over scanners. The service is scheduled to launch in the first half of 2012 on a limited basis in Salt Lake City, Utah and Austin, Texas before a full rollout.

Gemalto announced this week it had been selected by Isis as its Trusted Service Manager (TSM) to provide secure contactless payments and other NFC services through its Allynis TSM solution.

Sebastien Cano, Senior Vice President of Telecommunication for Gemalto, said the company is establishing a "pretty large, highly secure operations center" in Dallas where the infrastructure of the project is being managed. "It's as secure as a facility that produces actual bank cards," he said, adding that it will be the largest TSM project in the world today.

Cano said the solution for Isis will not only support basic mobile payments, but also many other NFC services, such as digital couponing and loyalty programs. Also, he added that the solution will be compliant with Visa and MasterCard security standards. Using Isis, he said, will be "way more secure than the current mag-stripe card most Americans have in their wallet today."

Cano acknowledged that many pieces have to come together before there is widespread adoption of Isis in the U.S., including a proliferation of NFC-enabled mobile devices, more partnerships with financial institutions and for merchants to invest in technology that can receive and process NFC payments.

Still, he said NFC payments will see a "massive adoption" in the coming years and added that Gemalto's TSM solution is built to support a network of hundreds of millions of subscribers from day one.

"This is a large-scale system, with a large-scale deployment in mind." he said.

However, there are still some impediments in the way of NFC becoming the dominant payments method, according to Celent senior analyst Zilvinas Bareisis.

"It's only one technology, there are others, like QR codes and cloud payments," Bareisis said. He added that it is tough for mobile payments technologies to gain traction in the U.S. "because of the prevalence of mag-stripe cards." Still, he added that "Isis is doing a lot of things right" and that banks "should not be afraid" to embrace NFC.

He said banks should work with the likes of Isis or Google, which launched its Google Wallet offering earlier this year, or run the risk of being undercut in this market by nonbank entities such as PayPal. The role of the bank, he said, could be reduced to funding PayPal accounts if it cedes this.

Bareisis noted that NFC payments technology is still in its nascent stage in the U.S., and that it is difficult to predict how fast or large the market will grow.

"It's definitely a multi-year journey," he said.

ABOUT THE AUTHOR
Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as ...