Visa and MasterCard Continue to Downplay Isis, While Taking Steps to Compete
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Although both Visa and MasterCard are downplaying the impact of the Isis joint venture on their mobile-payment strategy, there’s little doubt that the U.S. mobile-carrier JV adds a sense of urgency to everything the payment schemes now do with mobile phones.
As we saw earlier this month at the Cartes expo in Paris, Visa announced the first certification in its history of a mobile-payment device, with the type approval of smartphones to carry its Visa payWave application on microSD cards. While only certified to run on the iPhone and two other popular smartphones so far, the Visa certification of DeviceFidelity’s In2Pay technology was ahead of schedule.
Visa had earlier talked about commercializing the microSDs toward the end of the first quarter of 2011. And trials of the microSDs and companion iPhone case had only begun in the fall, mainly among employees of the pilot banks.
This sounds like a crash certification course, though Visa’s head of mobile product development, Dave Wentker, insists Visa didn’t cut any corners on its usability and security standards–outside of reducing by half the read-range requirements for the microSD, to 2 centimeters compared with conventional contactless cards. That’s the same lower read range that Visa applies to passive stickers and, in the future, will apply to payWave on full NFC phones.
Wentker told me interest is running “very, very high,” among banks for the microSD card product, but when I asked if he thought that was because banks are worried about the plans by Verizon, AT&T, T-Mobile USA and their partners to launch the new Isis mobile-payment brand on NFC phones next year, he again rejected the thought–pointing out that the beginning of Visa’s 18-month Visa microSD card program predated serious talk by the major U.S. telcos of Isis by several months.
"(It’s) because everybody wants to work in mobile. Banks are no different," Wentker explained of the interest by major banks in the microSD. He added that Visa is still working to put payWave on full NFC phones. And the card network recently launched an app for the iPhone to deliver merchant offers, though it is not linked with Visa payment.
Still, I hear Visa is more concerned about Isis than it is letting on. The certification of the first devices for the microSD helps Visa come out with an offer well before the telcos are ready with theirs, though I’d say the payWave microSDs still need more market testing.
Moreover, there are rumors that Visa has been shopping around for a mobile payment or m-wallet company. The talk is that Visa is looking to make an acquisition to fill gaps in its Visa Mobile offer and calm anxious nerves, roiled by Isis, among its major banking customers.
MasterCard Exec Looks Past Bridge Products
Meanwhile, MasterCard at Cartes announced its long-planned project with Turkey’s Garanti bank and No. 3 mobile operator Avea using a flexible-antenna product from France-based Gemalto to turn mobile phones into payment devices. The bank and telco are ordering at least 100,000 units of Gemalto's N-Flex product, which uses a flex-antenna attached to an overlay chip that rests on top of the SIM card in conventional mobile phones. The antenna usually lies on top of the phone's battery. The telco also needs to issue new SIM cards carrying MasterCard's PayPass application to work with the devices.
But MasterCard has yet to certify the device, or any bridge technology for that matter, to carry PayPass, not counting passive stickers.
In fact, I suspect the commercial launch in Turkey has a lot more to do with competitive pressures in that country than it does MasterCard’s eagerness to use flexible-antenna products.
MasterCard is keeping all avenues open to launching contactless-mobile payment, including passive stickers, Bluetooth dongles and iPhone attachments, even microSD cards like the ones being pushed by rival Visa.
"(But) in my view is, the consumer doesn’t want to get a microSD card from the bank," said Geoff Iddison, group executive, e-commerce and mobile, at MasterCard. "You’re talking about consumers who are young and mobile. They want, at the flick of a switch, all the functionality, and that’s what they’ll get from the secure element embedded."
It’s obvious Iddison, a former PayPal exec, favors full NFC phones over bridge technologies, not just for payment, but targeted offers from advertisers, among other applications.
"The consumer is redeeming those offers at the point of sale in real-time," he said during a presentation at Cartes. We feel like it’s going to be a very interesting topic in 2011–proximity marketing through the mobile devices and that transaction being consummated through NFC."
Iddison always seems to mention the word “embedded” when talking about secure elements in NFC phones. That’s probably no accident. Perhaps MasterCard believes it can take advantage of the fact that many or most of the NFC smartphones expected on the market next year will come with embedded secure chips that could store payment and other applications, in addition to support by the phones for applications stored on SIM cards. Though officially secure-element "agnostic," MasterCard would prefer to see PayPass stored on an embedded chip than on SIM cards directly controlled by mobile operators.
Of course, in the United States, where mobile operators buy most of the handsets, telcos will also probably control embedded secure elements.
In any case, MasterCard is busy working on NFC. It believes it can use its years of experience working with the technology, including participation in 30-plus public NFC trials trials–along with its more mature PayPass infrastructure–to successfully compete head-on with Isis using full NFC phones. Iddison acknowledges that the U.S. mobile telcos are a threat to MasterCard’s business at the physical point of sale, just as his former company, PayPal, is.
Still, MasterCard, like Visa, is discounting the prospects for Isis becoming established, calling it a "proprietary," or closed-loop, payment brand. That is despite the Isis JV's plans to invite other banks to issue payment applications under the brand and the likelihood, according to many, that Isis would be able to get its application onto the same contactless readers as the other major brands share–for those retailers that agree to accept Isis. The Isis specification will be the same as for the Zip contactless application from Discover Financial Services, an Isis partner.
"The challenge that Isis will have is to re-terminalize all of those merchants to a terminal specification which is proprietary," Iddison said in response to a question from NFC Times. "You try to go into a merchant and say: 'Take this terminal, change all your backend to accept this payment, and we’ll give you a competitive merchant rate. And by the way, it’s proprietary. You can’t use your MasterCard or Visa.' "
"Good luck to them."