Key carriers AT&T, Verizon and T-Mobile officially announced their partnership to create ISIS, a national mobile commerce platform, to make mobile wallet a reality.
The trio of carriers are building the network christened ISIS, to enable point-of-sale payments using mobiles rather than cards. The network uses smartphones and near-field technology (NFC) to effect mobile payments. The service will be launched in 18 months.
Michael Abbott, former GE Capital Executive, has been appointed ISIS CEO.
The companies have roped in Discover Financial Services and Barclays Plc to make contactless payments a possibility.
The NFC technology uses short-range, high frequency wireless technology to enable encrypted messages to be transferred between devices.
Michael Abbott iterated his vision for ISIS stating that While mobile payments will be at the core of our offering, it is only the start. We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes.
The partnership report had first surfaced in August. The NFC technology is based on the radio-frequency identification (RFID) technology whereby an embedded chip or an antenna allows consumers to wave their card or smartphone over a scanner at the point of sale.
The development of the partnership can challenge Visa and MasterCard's hegemony by creating an alternate mode of payment, thus saving retailers the transaction fee they have to pay to Visa and MasterCard.
Currently the payment infrastructure is like a grid of rails, a network that connects players who facilitate payments like point of sale machines, banks and clearing and settlement houses. To develop alternate payment structures providers have to tap into the underlying plumbing. However, tapping this grid requires elaborate coding which is being handled today by players like Amazon, PayPal and IP Commerce. These companies then expose APIs to help developers to make innovative applications to facilitate payments.
Visa and MasterCard's business model revolves around charging a percentage of the merchant discount for the network it provides. However, as the devices get connected through Wifi to the web newer applications will make it possible for vendors to bypass this rail.
The trio of carriers is part of the underlying plumbing that assists in connecting the players who facilitate payments. Thus their plunge into contactless payment domain is a growing sign of various partnerships coming along to create alternate payment methods. They are using Discover Financial Service to create a mobile payment structure over the grid. This will be a threat to traditional players like Visa and MasterCard who will have to devise new applications to harness their rails or will have to maintain proprietary control over their network and develop value-added services to compete with third party application developers.