Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
The consortium is in talks with additional payment networks and banks.
Isis, a startup mobile payment system that hopes to offer contactless payments at merchant locations starting next year, has dropped its plans for a limited network and now is in talks with additional payment networks and banks, confirms Jaymee Johnson, Isis head of marketing.
Johnson would not name the networks or banks Isis is talking to, “but we’re talking to all of the players in the industry, the big payment networks and the big banks,” he says. Isis formed last year as a joint venture between AT&T Mobility, T-Mobile USA and Verizon Wireless, with Discover Financial Services and Barclaycard as financial partners. Isis launched with a plan to build a mobile payments network.
The founders of Isis may have come to a realization that success is more likely with more card brands involved, says Richard Ogelsby, senior analyst at Aite Group LLC.
“I don’t know if the current players would have been terribly successful if Isis didn’t include the major card brands,” Ogelsby says. “If you have a wallet that doesn’t contain the major card brands, it would be less competitive.”
Visa Inc. and MasterCard Inc., the two largest payment brands, declined to comment on Isis.
Assuming additional participants are brought in, the Isis mobile wallet has the potential to hold many types of payments, Johnson says, without altering the relationship between the cardholder and card issuer.
“We distribute the phone, manage security and take care of over-the-air security,” he says. “We’re not looking to take away or replace or supplant the financial relationship.”
Johnson also refuted the suggestion in a May 4 article in the Wall Street Journal that these discussions reflected a scaling bank of the company’s plans. “This will allows us to have more banks participating,” he says. “It allows us to go broader in terms of distribution and get there faster. We can go bigger, broader and faster than we otherwise would have.”
And contrary to some published reports, Isis has no plans to abandon Near Field Communication, a wireless technology that consumers can use to make payments in stores with a tap of their phones on a terminal. Marketers can use NFC to deliver mobile marketing messages to handsets, Johnson says. For instance, a poster with an embedded NFC can transmit a discount coupon to a shopper’s NFC-equipped mobile phone.
Despite the carriers’ interest in tying other payment brands into Isis, convincing those brands to participate will take some work, says Nick Holland, senior analyst at Yankee Group Research Inc.
“They’re seeing the light and realize they can’t do this as a proprietary system,” Holland says. “If anything I kind of applaud this move. It could make Isis much bigger than it might have been. We’ll see what works out.”
Isis needs to be open for it to have success, Holland says, something the organization telegraphed when it announced last November a test in Salt Lake City. “The Isis mobile commerce network will be available to all merchants, banks, payment networks and mobile carriers,” the November announcement said.
“They announced themselves they were looking to be an open platform,” Holland says.
Despite the potential addition of new payment companies, Isis still presents problems for merchants, says Richard K. Crone, CEO of Crone Consulting LLC.
The big question is cost, he says. Contactless readers that enable NFC can cost between $100 and $200, Crone says. Who will pay for that? He doubts merchants will want to.
“I’ve been in meetings with some of the largest retailers considering the Isis offer and they were not impressed,” Crone says. They not only did not want to spend $200 per checkout lane, but balked at potential payment software changes, he says.
Johnson says Isis transactions will work with most contactless readers—McDonald’s and CVS are among the largest retailers with such devices already installed—but software updates will be necessary in order for the installed point of sale systems to be able to handle an Isis transaction.