America’s Isis crisis in NFC mobile payments

America’s Isis crisis in NFC mobile payments

Since Google launched its Google Wallet earlier this week the Isis crew have been out in full force talking about Isis, which probably won’t get to market in Salt Lake City and Austin until early-mid 2012, and that is  just in a couple of test cities at that. If you have never heard of Isis let us give you some back story. Isis is a joint venture formed by AT&T, T-Mobile and Verizon where the three mobile network operators have come together to go into the NFC mobile payments business, effectively controlling most of the market in the United States. Each mobile network operator intends to charge companies for having an NFC payments capable app stored on a subscriber’s phone and then Isis will act as a trusted service manager that provisions security apps being installed and acts as part of the payment process. If you would like to know more about what a trusted service manager is and does, check out our post here.

Verizon Wireless, AT&T and T-Mobile USA first announced Isis in late 2010, promising a bunch of services that will allow consumers to conduct mobile transactions in brick and mortar stores, redeem coupons and use store loyalty cards right from an NFC phone. In May, Isis said it would open its system to all credit issuers and banks, and in July welcomed financial services providers Visa, MasterCard, Discover and American Express to its ranks. Isis have said that the partnership with Visa, MasterCard, Discover and American Express will give more options to consumers and be able to utilize NFC POS terminals that are already deployed.

Isis has an agreement with C-Sam who have a very robust NFC mobile wallet offering, and they intend to offer NFC payments over the three member mobile network operators’ airwaves. Isis has recently been knocking Google Wallet. In fact, Jaymee Johnson, Head of Marketing at Isis, said in an interview with PCMag that ”[Google Wallet] is really, really limited in scope: single handset, single carrier, single bank.” He added, “It’s not enough to impact the behaviors of tens of millions of consumers, which is what the industry needs to go forward.” He forgot to mention that Google Wallet is currently the single player in the single US NFC payments market.

Nonetheless, all is fair in love and business, and yes it is understandable why Isis would want to shift some focus off Google, who has got their product in the marketplace 6 months to a year earlier than the combined AT&T, Verizon and T-Mobile could. Nothing we have said so far indicates why we wouldn’t ever use Isis NFC mobile wallet though.

Should you use Isis NFC mobile wallet when it launches?

As you are probably aware, which services you choose and use is up to you. It is one of the great things about living in America. Consumers have options and can tell you which you services you should purchase and utilize. In this post we want to raise some of the concerns with Isis and organizations like Isis around the world. However, options can be stunted by organizations who conspire to control vast portions of an industry and this is the case with Isis. As we mentioned before Isis is owned and run by Verizon, AT&T and T-Mobile. Together they enjoy the vast majority of US wireless subscribers. Together they are actively attempting to shut out competitors. Google produces the Android operating system used on millions of mobiles and Isis have stated that they will have their NFC mobile wallet run on the platform.

“It’s safe to say that when Isis launches we’ll have multiple payment networks, multiple issuers, multiple handsets, multiple operating systems, multiple manufacturers,” Jaymee Johnson said in his interview with PCMag. “Even Android?” he was asked. “Yes. And Android,” he added.

In shutting out competitors Isis is creating a monopoly for the trusted service management and provisioning of services in the United States. Sprint still have some of the market, but Isis has more. Isis is touting that it will give consumers more choice and yet at the same time reducing choice by keeping competitors out. We actually think Google may have a legal case against Isis and the trio of mobile networks if they allow the Visa NFC mobile wallet on their network, which would also be a direct competitor. Visa is due to release their own NFC mobile wallet within the next month or so, it will be a great thing to have another choice in the market aside from Google Wallet. In that case, the market will decide who has the lion’s share of the market and who takes second place.

It will be by consumers making choices about which services best meet their needs. Microsoft is also rumored to be producing an NFC mobile wallet that is said to launch next year but it is unclear whether consumers will be able to use this competitor’s product if they happen to purchase their cell service through the three Isis member organizations. Other competing services are said to come from Apple and MasterCard also, but as its stands each will have to buy their way onto Verizon, T-Mobile and AT&T’s network and work with Isis for TSM services whether that be fully vested or partially vested. Either way it adds costs that will ultimately be shouldered by consumers. If the fact that Google Wallet has not yet been allowed on any of the three networks is anything to go by, other services may also find themselves locked out in an anti-competitive maneuvering game that is being played out by Isis MNOs.

Net Neutrality, mobile payments and Isis NFC

You pay handsomely for your data usage. Another objection to the Isis approach is should they be allowed to constrict what data you use and which services you use? This is a net neutrality issue, even though large MNOs lobbied and successfully had wireless data removed from the legal net neutrality issue. They were able to escape regulation by the FCC because of an arcane administrative ruling issued during the Bush administration that reclassified internet providers as “information services” rather than “telecommunications services.” The FCC is specifically authorized to regulate only the latter. However, with more and more people using mobile devices as their primary way to access the internet a ground swell is growing that objects to mobile network operators charging for access to third party organizations outside of the data charges that consumers are already paying to access data.

Whether the “information services” label was a mistake or not, it becomes ever more apparent that regulation is required and neutrality should be enforced on mobile carriers as it is on ISPs.

Isis, privacy and security concerns with a network controlled NFC mobile wallet

As if a potential anti-competitive monopolization of more than 66% of the market share of bank and credit card payments and a potential issue that doesn’t give neutrality to data on a network wasn’t enough, other concerns about the continuation of service and privacy exists with a project like Isis. A great example would be this – what would happen if you had a billing dispute with your mobile network operator? If they shut down service to your phone you would not be able to make payments for daily groceries. This is just one question that will come up more in a few years when we are getting towards a cashless society.

Because three of the four largest networks are involved with Isis, it would also be likely that you would not be able to reactivate service and payments with any partner mobile network operators. In other words, aside from getting to your bank and getting a card issued or getting cash from an account you would be taken off the map. With banks and card issuers there are laws that protect you in these circumstances, but in this new realm of mobile payments no such consumer laws are in place to prevent the above example from happening.

Isis also plans to be the trusted service manager for mobile payments. That means they will be aware of all purchases you make and will target coupons and marketing directly at you based on your buying preferences.  If you are a privacy minded consumer, having your mobile network operator knowing your purchase history, controlling which data services you can use for payments and having that same organization to have control of whether you can make payments is probably a cause for concern. Isis are marketing themselves as giving consumers choices, but when you dig a little the trust starts to appear that consumers’ choices are being hampered with no legislation in place to protect consumer interests.

America’s Isis crisis with NFC payments Summary

If Isis was just another competitor in the market it would be a positive addition to a market that is set to explode. As it stands right now, only Sprint and a handful of regional providers will be able to provide open services to their subscribers. Every consumer who signs up for Isis empowers anti-competitive behavior that can ultimately degrade consumers’ rights and privacy. Google Wallet is an open product, Visa is set to compete in the open market with their NFC mobile wallet, but when it is on an Isis network carrier it becomes controlled also. The UK joint venture have got in hot water for similar exploits and the European commission is considering whether or not they should shut the UK NFC joint venture down.

LightSquared and a couple of other new networks are expected to launch which may give some relief to the Isis crisis, but ultimately consumers deserve the right to pick which provider they want to use irrespective of the network carrier they access mobile data with. NFC is bringing a lot of changes, and many of them are very positive. Joint ventures like Isis need the attention of legislators and regulators to protect consumer rights in regards to NFC payments.