Will carriers cash in on Isis?

Sue Marek

Earlier this week, Verizon Wireless (NYSE:VZ), AT&T (NYSE:T) and T-Mobile USA announced they did something relatively unheard of--joined forces--to launch a mobile commerce initiative called Isis. The fact that these three Tier 1 operators decided to work together on this project underscores the importance of mobile commerce in the future. But I believe it will take more than the firepower of three Tier 1 operators to make Isis a success. The mobile commerce industry is fraught with fragmentation due to a lack of standardization as well as the conflicting interests of banks, mobile operators and handset OEMs.

Isis is envisioned as a nationwide mobile commerce network that will enable consumers to make point-of-sale purchases via mobile devices. The network will use Near Field Communications to let consumers pay for retail goods and services by waving a radio microchip-equipped smartphone at a corresponding retailer reader unit. 

Isis CEO Michael Abbott indicated that it may be 18 months before Isis debuts in any markets. And during those 18 months a lot of new developments (and competitors) could enter the mobile commerce space.

Already Google is jumping into the fray, announcing this week that it will integrate NFC technology into the next version of its Android mobile operating system. Likewise, Apple (NASDAQ:AAPL) and Research In Motion (NASDAQ:RIMM) have both hinted that Near Field Communications may be included in future iterations of their respective products. Will Google, Apple and BlackBerry work in conjunction with Isis? It's hard to say.

Sprint Nextel (NYSE:S), meanwhile, is the only Tier 1 U.S. operator that isn't a part of the Isis venture. The operator said it is weighing multiple mobile payment solution alternatives. "Although we are not part of [the Isis] announcement, Sprint is currently investigating several options on how to bring mobile payments to our customers," a Sprint spokesperson explained in an email.

The spokesperson went on to say that Sprint does not want to compete with the card companies and banks that people already may use, and it doesn't want to be part of a proprietary system.

In an in-depth report on mobile payments, Portio Research suggested that the best scenario for success in mobile payments is one in which mobile operators and banks join hands to provide a mobile payment service to users. The consumer makes purchases using their NFC-enabled handset, and their bank deducts the transaction fees from the consumer's account--and the operator can either add its fee to the monthly bill or deduct it from the consumer's prepaid balance.

Portio said this model has received the most positive response because each part of the value chain receives a share of the revenues. However, for this type of scenario to work, consent must be obtained by the banks, the operators and any third-party service provider, which means it could be difficult to implement.

Isis appears to be enlisting the help of trusted partners to build out the payment network: Discover Financial Services is to build the necessary mobile payment structure, and credit card firm Barclaycard US is expected to be the first issuer on the network. 

But Isis is going to need more input from the financial sector and more collaboration with handset OEMs and others to become a reality. I'll be closely watching its progress. --Sue

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