Isis Expects to Launch with Three Banks; Chase, CapOne Likely
The Isis joint venture expects to have about three payment issuers when it launches NFC service in two U.S. cities next year, with JPMorgan Chase and Capital One among the likely banks, NFC Times has learned.
The “soft launch” of Isis in Salt Lake City, Utah, and Austin, Texas, will involve fewer than 1 million NFC phones, but plans call for a national rollout in early 2013, when many more NFC phones would be available running the Isis mobile-wallet services, said Doug Kilgour, senior business development executive.
He said Isis expected more issuers to join after the national launch gets rolling, and there could be merchant private-label cards, among other applications, in the wallet after the wider rollout begins. It's important to give consumers a choice of payment issuers, among other applications, said Kilgour.
“We’re going to be supporting a number of issuers to start with, probably three,” he said, speaking at the recent NFC Payments USA conference in Miami. “We’ve talked about the majority of the rest that are nodding their heads and saying, this provides value to us, we want to be involved when you logistically can allow us to be involved.”
Kilgour, declined to identify any of the banks that plan to issue payment applications for the Isis wallet, but did say one of the applications at launch would be a prepaid account, or “e-cash,” as he put it. The other is expected to be a credit application. And merchants would also be able to propose loyalty, couponing and offers to consumers, he said.
NFC Times has learned that JPMorgan Chase will probably issue the first credit application and Capital One will likely offer the prepaid card, according to sources. U.S. Bank is also a likely issuer for the Isis wallet, said one of the sources. Smaller credit card issuer Barclaycard US has been the earliest bank to say it would issue for Isis, though that was when the three telcos planned to launch their own payment brand. They have since dropped the idea and decided to work with established payment brands.
A spokeswoman for Chase, the largest issuer of contactless cards in the United States with its blink application, said the bank would have “no comment at this time.” A Capital One spokesman did not respond with a comment, as promised. And a U.S. Bank source also declined comment.
With its 2013 rollout, Isis, owned by major U.S. mobile carriers, Verizon Wireless, AT&T and T-Mobile USA, will be following well behind Google, which launched its Google Wallet in five major cities in September. Google is expanding to other cities gradually.
Google’s only banking partner so far is Citigroup, and it is working with only one carrier, no. 3 U.S. telco Sprint. To date, it has introduced one phone supporting the wallet, the Nexus S 4G.
Like Google, Isis plans to enable consumers to pay and redeem coupons and offers with a single tap. And like Google, Isis plans to earn revenue by delivering the discounts and other offers, including through NFC tags embedded in smart posters.
In addition, Isis plans to charge fees to banks and other service providers to rent space on their SIM cards or other secure elements in the NFC phones the carriers sell. Google will not charge Citi or other payment service providers to be part of the Google Wallet.
Kilgour indicated that the Isis telcos would have handsets from as many as six major phone makers at the wallet launch, which is planned for around June 2012. He explained that the joint venture is limiting the launch to two mid-tier cities in order to concentrate its promotion of the new mobile services.
“We want to be able to control our media message without a lot of spillover,” he said. “We really wanted to give an experience to the consumer, the merchant and issuer that will be similar to a national launch at scale.”
The idea is that chains in the two cities that see consumers using the Isis wallet for loyalty, offers and payment would be more likely to expand acceptance to locations they have in other cities.
‘Not Just a Pilot’
Isis in the past has said it chose Salt Lake City in large part because the transit authority there accepts credit and other open-loop contactless payment cards directly to pay fares. Austin is a university town that can be expected to have a lot of early adopters of new technology. And Isis enjoys support in both cities from the business community and government officials, Isis has said.
“It’s not a pilot we’re doing, this is a full-on launch, just in two cities,” said Kilgour. “We’re going to have thousands of locations, where you can shop. We’re going to have multiple issuers. We’re going to have full-on advertising to consumers that says, ‘come and get it, this is where it is. This is where you can use it.’ ”
All four major payment card networks, Visa, MasterCard Worldwide, American Express and Discover Financial Services, have said they would allow their payment applications to run in the Isis wallet. So all merchants that already accept contactless cards supporting the various payment brands could also accept the corresponding contactless applications in the Isis wallet. That’s in addition to new merchants that Isis manages to sign up to accept payment and other wallet applications.
The four payment networks also have said they would work with the Google Wallet. At present, A Citi-issued credit application and a separate Google Prepaid Card application both support MasterCard PayPass.
Google’s Android Control
On Google’s head start, Kilgour credited the search giant with “plowing the fields ahead of us,” that is, building interest in NFC-based mobile commerce. He declined to discuss competition between Isis and Google after his presentation, however.
Both Isis and Google have insisted that their mobile wallet platforms are open. But as NFC Times has reported, some industry sources believe the Isis telcos will try to block the Google Wallet from at least some of the Android NFC phones they sell to subscribers. That could include Google’s own Galaxy Nexus smartphone.
On the other hand, industry sources, among them mobile operators and financial institutions that see Google as a competitor, point to Google’s ultimate control of the open-source Android platform, and the fact Google hasn’t published key parts of the platform related to the mobile wallet and access to secure elements, including SIM cards. This leaves them vulnerable to Google down the road, if the Web giant decided to limit access to secure elements by failing to publish the key application-programming interfaces, or APIs, for the Android platform, they say.
“What does the architecture allow them (Google) to do in the future? There are a lot of questions to be answered about how open Google will be,” David Messenger, executive vice president, Enterprise Growth, online and mobile, told NFC Times. “They may start to be open, but choose to be more closed over time.”
A Google spokesman told NFC Times that the Google Wallet is an “open commerce ecosystem,” and the company will work with all banks, carriers and payment networks, among others. But he said: “For security reasons, we do not plan to publish APIs to control the secure element in the Nexus S.”
Still, it appears U.S. carriers, which control the distribution channels for mobile phones, will have the upper hand, since they could refuse to sell Android phones if they couldn’t control the secure elements.
While not referring to competition with Google, Isis’ Kilgour pointed to the large combined market share the Isis telcos enjoy–with more than 215 million subscribers and a 76% share of the U.S. market. Together, the Isis telcos, which include the two largest U.S. carriers, Verizon and AT&T, sold 130 million phones last year, he noted.
“The only way we can do this is to get together,” Kilgour said. “You just have to watch advertising the last three to four years to know that AT&T and Verizon are not exactly friends. They have commercials about how competitive they are. Now we can bring scale to the market place and heft and comfort to people, whether you are a consumer or a merchant or an issuer, because scale is what’s going to make it all happen.”
In September, Isis announced that six major handset makers, Samsung Electronics, Research in Motion, LG Electronics, HTC, Motorola Mobility and Sony Ericsson would have NFC models that could run the wallet.
Sub-Million Phones for ’12
But Kilgour noted that the Isis telcos do not plan to roll out NFC phones widely in 2012, at least not those fully activated, including the secure elements.
“It will certainly be less than a million phones in the United States–we’re starting in two markets,” he said during another conference session when asked how many NFC phones would support Isis for 2012. “We don’t want to have phones in the market before we have places to use them. It costs money to (put) those materials in there.”
Kilgour said the Isis telcos would probably sell more NFC-enabled phones at shops nationwide in 2012, especially if NFC comes as a default feature, but the real rollout is planned for 2013, when “we’ll see them all over the place.”
“NFC is a hardware play, we all know that,” he continued. “We bought 130 million phones last year before we could sell 130 million phones.
“We will tell them, LG and HTC (and others), ‘This is what we want. There’s going to be a secure element, and you’re going to load the Isis application in there,’ the phone part of the application.”
Then by 2015, just about all the phones will support NFC and secure elements, Kilgour added.
“Just like you can’t get a phone without a camera now, obviously by 2015, we won’t allow people to buy a phone that doesn’t have NFC in it, because we have a vested interest in it.”