Isis gets $100 million investment from Verizon, T-Mobile & AT&T

Isis gets $10 million investment from Verizon, T-Mobile & AT&T as it plans to fight Google Wallet and prepares for the NFC wallet wars

Verizon Wireless, AT&T Inc. and T-Mobile USA are planning to invest more than $100 million in the Isis joint venture, which allows customers to pay for goods and services with their NFC phones, people close to the matter told Bloomberg’s Business Week. The war chest capital injection sets up Isis to compete in the upcoming NFC wallet wars that will see Google Wallet, PayPal, Visa, MasterCard, potentially Apple and Isis enter into the fray to duke it out to see who rules consumers’ bank accounts and payments. However, the amount of funding that Isis actually receives is said to be dependent on how many banks and merchants the joint venture can secure. The funding is private so is not public knowledge and full details may never be known. Many aspects of the Isis joint venture’s plans have been secretive so far with no word on issues that may impact consumers’ choices and the ability for competitors to compete on the three major networks.

It is expected that by 2015 NFC payments as an industry could top $1 trillion dollars globally, and a battle for control is looming which may not be good for consumers. For NFC payments to work many industry stakeholders are required to participate. These organizations range from mobile network operators, trusted service managers, card issuers, banks, POS terminal providers and merchants. The danger that a joint venture like Isis poses is one of systemic control of this emerging space by controlling competition partially through the joint venture which will act as the trusted service manager which could see it difficult for other trusted service managers to operate on the majority of networks in the United States.

What does Isis mean to Google Wallet, other NFC payments competitors and consumers?

The other part of the joint venture system that potentially will negatively impact consumers is where each individual network decides which financial data can travel over their networks. The way this works is through the secure element. Isis has chosen to use a SIM card to store secure applications and financial data. Verizon has said that six services can be managed and held on a SIM card, which is thought by industry experts to not be enough. The three network operators are said to be planning to charge companies to lease space on these SIM cards and can no doubt reject any service that may compete with Isis.

Back in early June AT&T’s Mobility CEO, Ralph de laVega, said that Isis planned to enter into talks with Google so consumers could swap between an Isis provider and Google Wallet. However, since then no news has come forth about whether this will happen and Isis has remained deathly quiet about whether the networks will allow Google Wallet data to travel over their networks. We can only assume that if Isis keeps competitors like Google Wallet off of their network that the same situation will arise for other competitors the joint venture views as a threat, who probably represent no revenue for the group. This could mean consumers’ choices are restricted by the very same companies that already take a sizable cuts of family budgets for cell phones. This scenario could lead to a plethora of class action suits in the United States.

The question then arises about the levels of monopolization a mobile network operator should have over which financial services its customers can utilize. If the bricks and mortar world financial services are regulated strongly, it could prevent mobile network operators from cutting consumer choices, but this new emerging industry has no such consumer protection is in place. It also raises questions of neutrality, and whether mobile network operators can have the jurisdiction to decide how a user uses data on their networks – data that is paid for by consumers. We are not talking illegal data here, but if a secure element is embedded in a phone instead of in a SIM card and the access control of that data falls to an organization outside of the joint venture, it is unclear how that will be handled.

Google Wallet and Visa mobile Wallet will hit the market before Isis

Google announced its product in May and is expected to launch its NFC payments service within weeks to the general public. Visa has said that it will launch its own NFC mobile wallet in the fall, which puts both companies ahead of Isis. However, it is expected that it will be the early adopters who will champion the new payment method in the early days and that it will take time for other consumers to build a comfort level with the new technology. Visa has a model of “coopetition” in which it both supports other projects and builds its own. Google, on the other hand, represents a clear and looming threat as it has publicly stated that it does not intend to charge providers for using Google Wallet.

By November, the first flock of NFC phones that are NFC payments capable is rumored to have reached the market and that is when we can expect to see the wallet wars begin. Isis is set to enter the wallet wars in early to the  middle of 2012 (we bet earlier rather than later).