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Isis to launch in a few weeks (NFC iPhone case on the way), but questions abound

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Mike Dano

Isis--the mobile payments joint venture among AT&T Mobility (NYSE:T), Verizon Wireless (NYSE:VZ) and T-Mobile US (NYSE:TMUS)--will launch nationwide within the next few weeks with a redesigned app. The company's NFC-based services will work across most new Android phones, and Isis plans to support the iPhone via an NFC-capable case (and related iOS app) that it will release in the next few months. The company didn't release details on the NFC iPhone case, including how much it would cost. When it launches, the company expects Isis users to be able to make purchases at around 1.3 million contactless payment locations across the country, including at 24 of the top 100 merchants.

However, expectations are decidedly low for the joint venture.

Isis CEO Michael Abbott used his recent Money2020 keynote appearance to demonstrate the new version of the company's app, which Isis designed and Mutual Mobile built. The new app still supports merchant loyalty cards and payments, but it now puts users' credit and debit cards at the forefront of the interface.

But, according to numerous reports from the Money2020 show, the presentation was hampered by significant glitches: "Poor ISIS. Keynote demo gods are having a very bad day. Sadly, just illustrates how far from primetime this stuff is," Tweeted Charlie Kindel, a director at Amazon.

Perhaps even more worrisome, the demo appeared to do little to encourage those who saw it: "The new ISIS app looks nice, but doesn't seem much different than my current Google Wallet experience," noted Alex Linebrink, CEO of Core Merchant.

"I wasn't blown away by the keynote," summed up Jordan McKee, a Yankee Group analysts who has long been following the mobile payments and commerce market.

Nonetheless, Abbott reportedly remains upbeat about Isis' impending nationwide launch, promising that it would outdo rival mobile payment systems like those from PayPal. Further, he promised that there would be 30 million Isis-capable NFC devices in the United States by the end of next year.

Obviously, Isis has plenty going for it. The joint venture's parents control the sale of most of the smartphones in the United States. Jaymee Johnson, Isis' marketing chief, told me Isis will be promoted in thousands of AT&T, Verizon and T-Mobile stores by both in-store displays and by carrier sales reps. Further, American Express and Chase will both support Isis in its nationwide launch. Even Jamba Juice has promised to offer up to 1 million free smoothies to Isis users.

"We've been able to assemble quite the coalition," Johnson boasted.

There's no question this support will go a long way toward putting the Isis brand into the mainstream; it's the kind of marketing push players like PayPal can only dream of.

But analysts remain skeptical about many of the aspects of Isis' service and business model.

First, Isis' service requires NFC technology, and Apple (NASDAQ:AAPL) isn't the only player that seems less than enthusiastic about NFC (the iPhone has notably remained NFC-free). Specifically, Google (NASDAQ:GOOG) recently extended its Wallet mobile commerce platform to all smartphones running Android 2.3 and higher, eliminating a requirement that compatible devices must contain a NFC chip with a secure element. And the Merchant Customer Exchange (MCX) joint venture among Walmart, Target and other big-name retailers has said that it will launch its mobile wallet platform with barcodes and cloud-based technologies first, not NFC.

"Yankee Group's Consumer Survey data shows that just 18 percent of American device-owners have an NFC-enabled phone," McKee said. "Apple's resistance to NFC is also a blatant roadblock for Isis."

But perhaps most importantly, the Isis business model remains under a cloud. Johnson said the service will launch with two of the nation's largest credit card companies, American Express and Chase. However, Capital One and Barclays--two of the credit card companies that participated in the Isis trials in Austin, Texas, and Salt Lake City--are not going to be part of the Isis nationwide launch. "Why aren't (credit card) issuers rushing to be an Isis partner if that value proposition is allegedly so strong?" McKee noted.

Johnson explained that Isis doesn't make money from users. Instead, credit card companies and merchants pay the venture every time a user adds a credit card or merchant loyalty card to the Isis app. Johnson said that the service will launch nationwide with support from American Express and Chase, which means that Isis will get an unspecified amount of money from those two credit card companies every time an Amex or Chase user adds their Amex or Chase card into the Isis wallet. Johnson explained that Isis is using American Express' Serve technology to support addition credit and debit cards and bank accounts, which means that Isis users will be able to pay using any card, not just Amex and Chase cards. Johnson said that Isis will still be able to make money when users add Capital One, Barclays and other non-participating credit cards to the Isis wallet, but he declined to provide details.

As for merchant loyalty cards, Johnson said Isis users will only be able to add loyalty cards from those merchants that Isis has an agreement with--meaning that Isis users will only be able to use loyalty cards from the merchants that have agreed to pay Isis to get into the Isis wallet.

"Card issuers are interested in encouraging card spend whereas Isis is purely interested in getting consumers to link their cards to the wallet," McKee said. "This conflict of interest will continue to be problematic."

Of course, Isis will face a range of challenges as it works to launch across the nation--rivals stretch from Google Wallet to PayPal to MCX to the seemingly endless list of mobile payment and wallet startups like MobiKwik, CloudZync and Clinkle.

I understand that there are lots of companies that see value in the intersection of mobile, retail and payments. However, I don't really see Isis' take-it-or-leave-it approach as something consumers will warm to. For example, Sprint (NYSE:S) is taking a more accessible approach to mobile payments. As Kevin McGinnis, vice president of product development and operations at Sprint's Pinsight Media+ explained, Sprint currently supports Google Wallet as well as its own Boost Mobile Wallet, and Pinsight most recently announced an open platform enabling businesses to integrate NFC technology into their branded mobile applications.

"We did announce that we weren't going to be part of the Isis consortium. And it really wasn't as much to suggest we would be a rival of Isis, it's just that we're taking a different tack to the market, one that was more centered around an open business model," McGinnis told me. "So we could at some point support Isis and enable them on our devices. It's more around ensuring that consumers had choice."

It's that kind of flexibility that will make mobile payments more useful actual users. --Mike | +MikeDano | @mikeddano

Article updated Oct. 18 with Jamba Juice details.