by Elizabeth Woyke - Forbes, cross posted from Near Field Communications
May. 17 2011 – 7:06 pm
If ISIS, the mobile payments joint venture established by AT&T, T-Mobile USA and Verizon Wireless late last year, achieves its goals, it will be the way most Americans pay for purchases with their cellphones. So, just how will this service work?
Forbes recently got a preview of the ISIS “mobile wallet” application, which will likely officially launch in 2012. The app will come preloaded on compatible phones, either as part of their removable “SIM” cards or elsewhere in the phone’s hardware. The handsets need to be equipped with chips that support the wireless communication technology Near Field Communication (NFC). For now, the app only works with phones that run on AT&T, T-Mobile and Verizon’s networks though ISIS says it would welcome the inclusion of other U.S. carriers, including Sprint Nextel.
As its name implies, the ISIS app functions like a digital version of a wallet. It stores credit and debit card information in the form of digital card images that can be sorted and swiped with a finger. Tapping on a card calls up relevant data, such as the amount of money available, current balance and credit line information. Users can also view the transaction history related to that card.
Since ISIS also aims to be a full mobile commerce platform, capable of serving up mobile coupons and storing loyalty program information, the ISIS app also keeps track of retail reward cards. In the app’s current permutation, loyalty cards are stored at the bottom of the app’s screen while credit and debit cards inhabit the top. ISIS Chief Executive Michael Abbott says the firm plans to install NFC readers near store doors so consumers can scan their phones (and loyalty cards) as soon as they enter shops. That would allow shoppers to receive coupons targeted to their interests on their handsets while they browse.
The app also includes one-touch shortcuts for adding and enabling new cards, deleting cards and accessing a “help” directory. To make a purchase, shoppers will need to select a card to use, then wave their phones near NFC readers.
Though the app is considered (and called) the ISIS mobile wallet, ISIS will not handle payment transactions. Instead, payments will be routed over a bank or credit card company’s network, depending on the card being used. ISIS simply provides a “top-level, secure container” for the card data, says Abbott.
The ISIS wallet will also be a container for various widgets that will be able to deliver offers, coupons and other messages to users. Abbott says each financial institution and merchant that signs on to ISIS’ system will be able to host its own widget or app within the wallet. The three carriers backing ISIS (AT&T, T-Mobile and Verizon) can also host widgets/apps in the ISIS wallet, but Abbott says the operators will not get preferential treatment or placement. Independent companies like Groupon could also have a widget.
The structure has some interesting ramifications. One is that ISIS — and, by extension, the carriers behind ISIS – won’t know what its users are buying. Once a consumer taps on a card in the wallet, the app shifts to the corresponding bank’s “space.” “That information is routed to the banks,” says Abbott. “We’re not trying to intercept it.”
That should bode well for the security of ISIS mobile wallet transactions but it appears to shut the carriers out of the lucrative business of mining purchase data to direct personalized marketing and advertising offers to users. Abbott concedes that ISIS would have liked to own that information but says users may have objected to the practice and banks certainly would have. “Banks do not want outside people to have that information,” says Abbott. “They consider it proprietary.”
The upshot is that even though ISIS is supported by companies that are big brands and have direct relationships with millions of consumers, ISIS itself is a “B2B2C” company, i.e. a company that supports companies which in turn work with consumers. “We support other people’s consumers; we don’t own the consumer ourselves,” notes Abbott.
ISIS considered other options that would have allowed it to play a different role, such as condensing credit cards down to their 16 digits and redirecting those numbers “to the cloud”, where they could be routed around the card issuers. The firm also debated developing a new technology protocol that would let a user save all of his card data with ISIS and sidestep bank security. ISIS also thought about employing NFC stickers similar to California startup Bling Nation. But since each of those ideas presented security or cost hurdles, ISIS ultimately decided to pursue an open platform model.
The model, naturally, still bakes in some advantages for ISIS and its investors. Any business – bank, merchant or otherwise – that wants to be part of the mobile wallet will need to pay for inclusion. Abbott declined to share the exact revenue structure but contends that ISIS’ system “creates a substantial amount of value” for its partners that they, in turn, will be happy to pay for. “If you don’t try to hijack the card data, you can really build a [mobile commerce] ecosystem,” says Abbott. “And that’s what the merchants and banks really want.”
