Isis bid for iPhone users will not solve growth challenges
As competition in the mobile payments space continues to heat up, Isis is hoping to strike gold by giving iPhone users a way to take advantage of near-field communications payments.
Following a year-long test in two markets, Isis, which is a joint venture of AT&T, Verizon Wireless and T-Mobile USA, is gearing up for a national rollout in a few weeks. While Isis recently lost a couple of key partners, the company hopes it can revive interest with the NFC iPhone case as well as via a revamp of its mobile wallet application.
“A case needs to be sold and distributed to consumers, then it needs to be installed on the phone and then consumers need to start using it,” said Rick Oglesby, senior analyst at Aite Group, Boston. “At the moment, built-in solutions that come at no incremental cost are just getting started,” he said. “Having an iPhone case will enable a few early adopters, but it’s not likely to become a growth engine in the immediate term.”
The technology question
Because Apple has famously eschewed NFC in its last two iPhone releases, users cannot take advantage of mobile wallets from Isis and Google.
The Isis NFC iPhone case is expected to launch in a few months as well as an iOS mobile wallet app.
NFC, in general, has lost some steam in the market. Google recently extended the reach of its wallet beyond NFC while QR code-based payments solutions are seeing some success.
“Apple has snubbed NFC and played a role, with the US Carriers, in stunting the acceptance of NFC as a secure payment option for consumers,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.
“The US is increasingly seen as an Island in this regard, as the EU and Canada now ‘tap to pay’ with most credit cards and Japan has long-shown the way, regarding NFC potential,” he said.
“While a NFC case might not be widely adopted, the fact is that Isis can learn volumes from those who do use it about ways to improve their system and possibly push Apple toward NFC integration in their smartphones.”
There are also newer options coming out that hold promise, such as Bluetooth-enabled offerings from Apple – iBeacon – and PayPal – Beacon.
Using a case with an embedded NFC chip to enable payments for iPhone users is not a new idea.
For example, earlier this year U.S. Bank customers with a U.S. Bank FlexPerks Visa account who opted-in for the service could receive a customized U.S. Bank Go Mobile iPhone case equipped with NFC technology.
With the case on their iPhones, these customers are able to pay for purchases at retailers that accept Visa payWave by holding their phones over the contactless point-of-sale systems (see story).
“Expecting consumers to purchase NFC-enabled cases demands a much stronger value proposition than Isis has been able to offer,” said Daniel Van Dyke, research associate at Javelin Strategy and Research, Pleasanton, CA. “If Apple were to roll NFC capability into their mobile wallet, that might be a different story.”
The right partners
When Isis launches nationwide in a few weeks, it will work across most new Android phones. The company expects users to be able to make purchases at approximately 1.3 million merchant locations that have contactless terminals in place.
However, Capital One and Barclays recently pulled out of the program, highlighting the challenges in gaining scale and momentum for mobile payments and suggesting that these financial institutions did not see a substantial number of their customers who were interested in using Isis to pay for purchases during the pilot.
Isis is betting on more than just the NFC iPhone case to jump start its mobile wallet. The company has also revamped its mobile wallet app.
The new app reportedly puts a bigger focus on users’ credit and debit cards, but is not a big change from the current version.
Despite losing Capital One and Barclays, Isis still has the support of American Express and Chase, which will both lend a hand in supporting the national rollout.
That kind of marketing muscle will go a long way toward educating consumers about how to use NFC payments and in encouraging trial.
“Capitol One’s decision to pull out from Isis is certainly a discouraging sign for the wallet provider, however with the three major mobile networks behind the wallet, it can take the hit,” Javeline’s Mr. Van Dyke said. “Deep pockets means Isis can continue to push for partnerships and merchant and consumer adoption.”
One of Isis’s challenges will be in making headway against other mobile payments providers, some, such as PayPal, which are already available more broadly.
Others, such as MCX – a coalition of major retailers such as Target and Walmart – are expected to be launched soon.
MCX, in particular, could present a challenge to Isis, Google Wallet and others because of the existing payments relationship consumers have with the retailers they frequent.
The challenge Isis and others face is convincing merchants that it is worth their while to encourage their customers to pay via one solution over another.
“My view is that the merchant is king in digital wallets, merchants must be not only promoting it, but preferring it over other forms of tender and contributing significant value to consumers that use it,” Mr. Oglesby said.
“To do that, wallet solutions must provide very compelling loyalty and demand generation solutions that make it very compelling for the merchant to convince consumers to pay with mobile,” he said.
“If it’s compelling to merchants, then merchants will partner with wallet providers to make it compelling to consumers. As long as wallet providers are trying to make it compelling to consumers on their own, it will be a very difficult road.”
Chantal Tode is associate editor on Mobile Commerce Daily, New York