Isis – the consortium of wireless carriers that burst
onto the scene in November 2010 with grand plans to launch a
payments network to challenge Visa and MasterCard – has toned down
its ambitions. A wise decision, writes Louise
Naughton.

 

Pie chart showing the percentage of US consumers at ease with making m-paymentsIsis garnered
considerable press coverage during their launch in late 2010. Its
optimistic ambitions to launch a payments network to rival those of
Visa and MasterCard forced the payments industry to sit up and take
note of this start-up venture – Isis – formed by the telcos
AT&T, T-Mobile and Verizon Wireless.

The consortium embraced the spotlight at the time. But fast
forward a few short months and it is less comfortable being the
talk of the payments industry.

 

Strategic U-turn

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In a dramatic U-turn Isis
announced, in May 2011, that it was pulling plans to launch a
fully-fledged payments network, and would instead focus on
developing a mobile wallet capable of operating within the existing
payments infrastructure.

This took the payments industry by
surprise as many believed Isis, with its telco backing, was very
well positioned to put a rocket under mobile NFC payments.

The offering is still compelling –
an interoperable mobile wallet available through three of the
biggest telecoms networks in the US. But as many new entrants into
the payments industry seem to be finding, it is a difficult space
in which to carve a niche.

Two people close to Isis told the
Wall Street Journal setting up a network would have been
too “time consuming” and “too difficult”.

Jaymee Johnson, director of
marketing for Isis, confirmed the company’s mobile wallet plans to
Cards International but says that it is not scaling back
of its ambitions. Rather, the decision reflects the fact that it
was easier than anticipated to achieve alignment between all the
parties interested in mobile payments.

“It is correct that we have decided
not to build a stand-alone payments network,” says Johnson.
“However, media reports have dramatically and falsely
mischaracterised our plans as a ‘scaling back’ when in reality it
is an acceleration.

“What we are bringing to market
will be much broader, involving many more parties and will
ultimately allow us to kick-start the adoption of m-commerce faster
than we would have been otherwise able to do.”

Pull quote by Jaymee Johnson, director of marketing at IsisAccording to
Johnson, Isis has chosen not to build a payment network for the
simple reason that it doesn’t have to. The alignment of the three
industries key to mobile commerce –payments, merchants and
point-of-sale (PoS) is at the heart of Isis’ proposition.

In throwing down the gauntlet to
Visa and MasterCard early on, Isis CEO Michael Abbott put the
company in the spotlight.

It was originally thought that
building a payment network was the simplest way of achieving this
alignment. However, shortly after Isis’ launch, an unexpected
amount of positive interest flooded in from the dominant payment
networks and major banks.

“Building a payments network was a step that we decided wasn’t
necessary,” says Johnson. “We soon realised we were going to be
able to ignite the mobile commerce industry without having to go
through the efforts, expense and time in developing a stand-alone
network as we got an alignment between the industries much sooner
than anticipated.”

 

Sticking to the plan

Isis claims the nature of its
business strategy hasn’t changed and it was more the creation of an
alignment rather than the concept of the payment network that was
at its core.

The commercial launch of Isis’
mobile wallet is still scheduled to take place in Salt Lake City,
Utah during the first half of 2012 as originally planned.

Some might think, however, that the
start-up is trying to distance itself from the bravado of its
explosive launch and is overcompensating with reassurances that
everything is going to plan.

Richard Crone, founder of Crone
Consulting, says it is difficult for competing wireless carriers,
each with their own entrenched systems and procedures, to “play
nice together” but believes they will use the mobile handset’s SIM
card to ensure their financial participation in any NFC payment
scheme, with or without their own network.

“This is another example of how
hard it is for new intermediaries – handset makers, carriers,
Google – to insert themselves into the payment process,” says
Crone.

“Merchants and banks want fewer
intermediaries as more players will add more cost and complexity to
the payment process. Merchants are looking for solutions that will
enable steering to their own lower cost or ‘friendly tenders’ such
as private label credit, prepaid gift cards and PIN debit.”

It remains to be seen whether
merchants and banks are really capable of moving quickly enough to
take advantage of their incumbent position, miss the opportunity to
launch their own self-branded offerings or do nothing and cede the
ground to new intermediaries.

If the Isis U-turn should tell the payments industry anything it
is that adaptability and manoeuvrability are essential in the
emerging payments landscape.