A Forrester Research report analyzes the early successes and failures of Apple’s mobile payments system.
Consumers use Isis-ready handsets to make contactless payments.
Consumers finally can make contactless payments using their smartphones containing a mobile wallet issued by Isis, a consortium backed by wireless telecommunication carriers and banks.
Isis, which announced its formation in November 2010, says consumers in Salt Lake City and Austin, Texas, now can use smartphones from AT&T Mobility, T-Mobile USA or Verizon Wireless to make tap-and-go transactions at participating merchants in those two cities. The mobile wallet works only on select Android devices at this time, including three Verizon smartphones, five sold by AT&T and three from T-Mobile.Consumers must visit a carrier’s store in either city to get a new Isis-compatible chip card to insert in their smartphones in order to use the mobile wallet.
That chip enables the handset’s Near Field Communication capability. NFC is a two-way communication protocol that enables devices, such as a smartphone and a payment card reader, to exchange data.
To use Isis, consumers download the Isis mobile wallet app from the Google Play app store and load eligible American Express, Barclaycard, Capital One, Discover and JPMorgan Chase credit card numbers into the app. They also can use Isis Cash, a prepaid card loaded with $10 that comes with each Isis activation.
Initially, the only financial members of the Isis consortium were Discover Financial Services and Barclaycard. But in 2011, Visa, MasterCard and American Express signed on. That gave Isis strong support from issuers of payment cards and the mobile carriers that sell most consumers their smartphones. Still to come is broad support from retailers that must accept the Isis wallet in large numbers for it to be useful for many consumers.
A consumer who wishes to pay with Isis at a participating merchant, such as department store Dillard’s or Jamba Juice, opens the Isis app, enters a four-digit personal identification number and taps the phone against a contactless reader at the store’s checkout counter. Consumers also can redeem mobile coupons and enter their loyalty number in that single tap.
Isis’ commercial availability follows by more than a year the release of Google Inc.’s Google Wallet, which worked initially on only one smartphone on Sprint’s network. Google Wallet relies on NFC, too. Since then, additional Google Wallet phones have become available, including one that can be used on AT&T and T-Mobile networks.
Isis’ great distinction is that it is available from multiple wireless carriers on a wide variety of smartphones, says Rick Oglesby, senior analyst at consulting firm Aite Group LLC. “The best thing going is their customer distribution channel,” Oglesby says. The carriers’ retail store employees can show a consumer how to set up the app and how to use it, he says. “If they can take advantage of their consumer interactions at the point of smartphone purchase to get consumers enrolled and activated, they can create some significant momentum.”
Consumer adoption is the biggest hurdle for Isis, he says. Indeed, even Google was not powerful enough to surmount that obstacle. In August, Google rewrote the code for Google Wallet to enable consumers to save Discover, Visa, MasterCard or American Express cards.Previously it worked only with Google prepaid cards and Citibank-issued cards.
While multiple carrier support gives Isis a leg up, the carriers can’t control consumer behavior outside of their own stores. “Once the consumer walks out of the store the consumer is on her own,” Oglesby says. “They will still need compelling reasons to stop pulling their wallets out of their pockets and start paying with the phones.”
That will take effective marketing, he says. Merchants, too, will need reasons for accepting Isis, and promoting the service to merchants in local areas will be an important first step, Oglesby says. “They should be able to drive merchant adoption in a local area,” he says.“The bigger challenge comes when they go widespread and need to create the same buzz nationally.”
Isis also faces potential competition from merchants themselves. In August, a group of merchants, including 7-Eleven Inc., Best Buy Co. Inc., CVS/pharmacy, Target Corp. and Wal-Mart Stores Inc., announced their own mobile wallet program dubbed the Merchant Customer Exchange. Development is underway, and the group has not said when its service will be available.