Isis Trial Snapshot: Telcos Issue NFC SIMs, but Transactions Still Scarce
It's been nearly a month since the launch of the large Isis Mobile Wallet trial in Austin, Texas, and Salt Lake City, Utah, and so far merchants are reporting limited use of Isis by consumers, interviews by NFC Times have found.
The mobile operators that make up the Isis joint venture, Verizon Wireless, AT&T Mobility and T-Mobile USA, are reporting some success in signing up users and issuing NFC SIMs, according to interviews with mobile shops. And sources told NFC Times that they believe, overall, shops have issued a few thousand Isis-enabled SIMs.
Isis launched its mobile-commerce trial Oct. 22, following delays, with subscribers of the telcos able to download credit or debit applications offered by any of three issuers, JPMorgan Chase, Capital One and American Express. They can also use a preloaded prepaid Isis Cash application supporting Visa payWave.
Along with local locations of such national chains as Aéropostale, Dillard’s, Foot Locker and Macy’s, consumers can tap to pay for rides in and around Salt Lake City on Utah Transit Authority buses and trams, as well as making purchases at about 30 small Isis merchants announced for Salt Lake City and about 20 small retailers in Austin.
That’s in addition to hundreds of other merchant locations in the two cities that already accept contactless cards and, therefore, could accept payment from the Isis wallet, including McDonald’s restaurants and 7-Eleven convenience stores–although there are problems with support for the MasterCard PayPass contactless application at older contactless terminals, NFC Times has learned.
Consumers also can tap to redeem loyalty points and offers, though at a limited number of Isis merchant locations.
“The overall acceptance level, in terms of individual merchant doors, that number is in the many hundreds in both cities,” Jaymee Johnson, head of marketing at Isis, told NFC Times.
Slow Transaction Activity to Date
Isis declined to release information about SIMs issued or their use by consumers, but transactions activity appears to be slow so far.
For example, Terri Young, VP store manager for a Salt Lake City-area Macy’s department store, told NFC Times that she didn't know of any customers who had paid yet with the Isis wallet. The store has enabled all of its terminals to accept Isis, she said.
And a location of teen clothing retailer Aéropostale in Austin reported that only one customer had paid with Isis to date, despite the store putting in terminals about a month before the official launch. Isis confirmed that it had conducted beta testing around this time, and the user making the purchase was likely a beta tester.
Anthony Shuck, an assistant manager at a Champ Sports store in Provo, outside of Salt Lake City, said he also hasn't seen any Isis transactions, or those from Google Wallet, for that matter, but does get a few customers tapping with PayPass cards.
Other merchants reported a little more activity, though not a lot. At a Whole Foods Market in Salt Lake City, a front-end supervisor said he had seen two to three Isis transactions himself and estimated roughly a dozen transactions with Isis in total over the first two to three weeks following the Isis launch. And at BookPeople in Austin, where Isis had been in place weeks before the launch, co-owner Steve Bercu described customer use of Isis as “not continual; it’s occasional.”
There are some signs that use is increasing, as consumers start seeing more Isis promotions. The manager of a Jamba Juice store in West Valley City, Utah, outside of Salt Lake City, said that while she only gets about five Isis transactions per week, she believes activity is increasing. And a clerk at a Jamba Juice outlet in Salt Lake City reported five transactions in one day this week.
Mystic Java café owner Jeanie Harvey in Austin said she has talked to customers about Isis and believes they are interested, though like other small merchants, she has seen few if any Isis transactions to date.
“We have some people that come in that are technology savvy and say they’ve heard of that and just haven’t gotten the phone yet,” she said, adding: “I think once people start buying the phones, they will start looking for places that actually accept it.”
A few merchants contacted by NFC Times do not yet have Isis terminals installed, even though Isis announced their planned participation last May. These include Tony Caputo's Market & Deli and the Cactus and Tropicals garden shop, both of Salt Lake City, as well as Austin sandwich shop, Chez Rémy la sandwicherie, though the head of the latter said he expected an Isis terminal next week, which the joint venture agreed to pay for.
Representatives from the Utah Transit Authority were unavailable for comment.
The Isis Mobile Wallet app is available for free on Google Play for nine Isis-ready Android phones.
Verizon subscribers can use Isis with the HTC Incredible 4G, LG Intuition, Motorola Droid Razr HD and Razr Max HD. AT&T has made the service available on the HTC One X, LG Escape, Samsung Galaxy Exhilarate and the Samsung Galaxy S III. And T-Mobile offers Isis with the Samsung Blade, Samsung Galaxy S II, Galaxy S III and Samsung Relay 4G, according to mobile shops in the two cities.
Isis expects the three operators to offer up to 20 Isis-ready smartphones by the end of 2012.
That includes the iPhone 5, with an iPhone app and NFC-enabled case forthcoming, said Isis, though it declined to specify when. Payment applications will be loaded on microSD cards instead of SIMs to use the iPhone to tap to pay. The microSDs like the case are supplied by U.S.-based DeviceFidelity.
Promoting the Service
Outside of the iPhone, users need an upgraded SIM, supporting NFC and Isis, which carriers say they provide for free to existing customers.
Representatives in at least some of the shops interviewed by NFC Times are actively promoting the service–asking customers after they come in if they want to use the Isis wallet.
For example, a T-Mobile store in Austin told NFC Times it had upgraded between 20 and 25 SIM cards in the first week after launch. A staff member at this store told NFC Times that customers did not seem to know about Isis when they walked in, but said that sales representatives were promoting the service.
Other customers appear to be asking about Isis unsolicited, after seeing commercials or other Isis promotions.
In downtown Salt Lake City, a T-Mobile store reported that about 50 customers had come into the store specifically to upgrade their SIM cards for Isis during the first two weeks after the launch.
“There’s a big billboard just down the road,” explained store employee Ryan Osborne. “We’ve been doing promotions and that kind of stuff all over the store, talking about Isis.”
Osborne estimated that those 50 customers accounted for 10% to 15% of the store’s total traffic during the period.
Across town at another T-Mobile store, an employee told NFC Times that three or four customers a day ask her specifically for the Isis SIM card, and she estimated that her co-workers received a similar volume of requests.
And an AT&T store in Salt Lake City said customers were coming in after seeing commercials for Isis, which have aired in both cities since Oct. 22. A full-page ad for Isis also appeared on the back page of the Austin American-Statesman Sunday newspaper edition on Nov. 11.
Verizon in at least one market, Salt Lake City, is sending its customers e-mails promoting the service.
The interest among customers in signing up for Isis, while anecdotal at this point, could eventually translate into more transactions at the till.
“They’re (Isis-ready consumers) going to start looking for places they can actually use it, so that will help drive more business to me,” said Austin café owner Harvey.
Bercu, the co-owner of BookPeople in Austin, said he doubts Isis will increase sales, but could improve service. “That’s where the benefit is,” he said. “If the customers are interested in this, then we’re happy to offer it and let them do it.”
Besides the payment cards available for over-the-air download from the three issuers, Capital One, Chase and American Express, Johnson of Isis noted that the Isis app comes preloaded with the prepaid Isis Cash card.
This enables users to pay with Isis if they have credit or debit cards from other issuers, which can be used to fund the prepaid card, he said. The prepaid card comes with $10 from Isis as an incentive to try the app, and users receive an additional $15 in Isis Cash credit for registering the prepaid card. They then are also sent a physical Visa-branded card.
Meanwhile, on the acceptance side, many of the merchant chains involved in the Isis launch had already accepted contactless payments from cards that support Visa payWave, MasterCard PayPass, American Express’s ExpressPay, along with Zip from Discover Financial Services.
But many of the independent merchants who spoke with NFC Times said they did not previously accept contactless payments.
“This is our first mobile-payment technology,” Emily Malaya, director of sales and marketing at Rosemary’s Catering in Austin, told NFC Times. Added Mystic Java’s Harvey: “I was not set up to receive any contactless payments. I honestly didn’t know that it existed.”
Problem with PayPass
Also, NFC Times has learned that if Isis users were to try to tap to pay with a MasterCard PayPass application at certain older contactless terminals–like those found in some McDonald’s restaurants–they would likely not be able to conduct the transaction.
The terminals date from around the beginning of the contactless rollout in the U.S., five to seven years ago, and were intended to work with older contactless cards.
PayPass applications on NFC phones have longer application identification numbers and especially if there are more than one card on the phone, it would confuse terminals that were designed to look for shorter applications numbers. These terminals have never been upgraded.
Gemalto, the TSM for Isis and at least one of the issuing banks, JPMorgan Chase, referred questions about the problem to Isis, which in turn referred them to MasterCard. MasterCard did not get back to NFC Times with a response late last week. But there have apparently not been any complaints from users, since most PayPass terminals work with Isis.
A fix would likely require the financial institution to issue a revised PayPass application or perhaps a separate applet to translate the application ID number into a smaller number of bytes that the older terminals could read. That would probably require the banks’ TSMs to delete, reload and repersonalize the application.
Or Isis or the merchant could send a technician to the store to install new firmware on the terminals or replace the terminals themselves.
None of these options is particularly appealing, given that there are not many Isis transactions yet. But the failure of the wallet to complete a transaction at all terminals on which a consumer might tap has the potential to foul the user experience.
Limited Number of SmartTap Terminals
Meanwhile, in addition to contactless payment, Isis supports SmartTap, which enables users to redeem coupons and offers or use store loyalty cards along with payment in a single tap. Few if any of the small merchants NFC Times spoke with were supporting SmartTap as of the launch date.
Larger stores, such as an Aéropostale location in Austin, said all four of its terminals were SmartTap capable. And in Salt Lake City, Macy’s manager Terri Young said every terminal in her Macy’s store supports SmartTap.
And Mystic Java’s Harvey said her shop is in the process of setting up offers for SmartTap, but added that the shop uses its own processing system for loyalty cards at its point of sale, so she didn’t think the café would be supporting the loyalty program with SmartTap.
Early expectations were that merchants would focus on mobile payment, rather than SmartTap’s loyalty and couponing capability, at launch.
Isis said that if merchants support SmartTap, the program would help the merchants gather more data with offers, coupons and loyalty programs. But Isis vowed it wouldn’t collect transaction data that belongs to the merchants or “come between the relationship that exists between the consumer and the merchant,” Isis’ Johnson said, in a likely reference to Google, which collects transaction data when consumers use the Google Wallet.
But like Google, Isis also plans to make revenue delivering offers and other promotions, in the case of Isis, using the SmartTap service.
That’s in addition to charging payment card issuers to rent space on the Isis SIMs. NFC Times reported in June that the joint venture was asking fees of $5 per account per year from the issuers.
Isis has declined to confirm these fees or to say what it is asking issuers to pay for SIM rental. But Johnson did say Isis makes money in “two distinct ways.”
The first is enabling banks to put their cards into the Isis wallet and helping them manage the cards there. The second is enabling SmartTap transactions, “and there’s a revenue model associated with that,” he added.
Assuming the trial in Salt Lake City and Austin is a success, a regional or national Isis rollout is expected for 2013.
Still, it’s obvious that a return on investment for the reportedly well-funded Isis initiative will take time.
Dan Balaban contributed to this report.