Smartphones with embedded payment chips are scarce, but Isis, the wireless carrier-led mobile payments joint venture, predicts they will be plentiful enough by next year to support its tests in Austin, Texas, and Salt Lake City.
The only handset available in the U.S. with a Near Field Communication chip that can handle payments is Google Inc.’s Nexus S Android smartphone, and this already has been linked to a competing mobile-payment service, Google Wallet.
However, manufacturers, including Research In Motion Ltd., Nokia Oyj and others, have said they plan to include support for NFC applications in some or all of their future handsets.
“The handset pipeline around NFC is basically just about to explode,” Jaymee Johnson, ISIS head of marketing, said in a June 22 interview.
“That will change pretty dramatically … by the early part of next year and really the end part of this year,” Johnson added.
Getting a significant number of NFC handsets into the U.S. market is one requirement needed to make mobile payments systems like Isis and Google Wallet work. Both services would allow consumers to load their existing credit cards into a smartphone application known as a mobile wallet. They could use their NFC phones to make purchases with these cards by waving their handsets in front of special merchant terminals, another piece of technology necessary for the systems to take off.
Juniper Research in April estimated that one in five smartphones will have NFC functionality in the next three years. North America will account for half of all NFC smartphones in 2014, the researcher said.
All mobile payments players that intend to rely on NFC technology embedded inside smartphones face the challenge of making sure enough handsets are available to ensure consumers can actually use the services, said David Schropfer, a partner with the telecommunications consulting firm Luciano Group in Red Bank, N.J.
In the near term, companies may need to pair “interim solutions” with their systems to allow consumers to use existing smartphones to make payments, Schropfer said.
For example, the vendor DeviceFidelity Inc. markets an add-on product that uses an external memory card that contains an NFC antenna that can be inserted into some smartphones. For Apple Inc.’s iPhone, which does not have space for an external memory card, consumers can use a special phone case that holds the DeviceFidelity card.
DeviceFidelity is working with Visa Inc. and MasterCard Inc. on pilots of its technology with some of the card networks’ issuing banks.
Without using such technology, Isis and others are “simply not going to have enough customers to make a meaningful impression on the marketplace,” Schropfer said.
However, “customers that do have the technology required in their phones, who have NFC, and can use the Isis service when it rolls out in Salt Lake and Austin … will have a remarkable experience,” Schropfer added.
Johnson said the focus of Isis is on using smartphones with embedded NFC technology though the venture is also investigating “bridging technologies” in the short term.
AT&T Inc., T-Mobile USA and Verizon Wireless in November announced the formation of Isis, which is planning to work with multiple banks and card networks. Discover Financial Services and Barclaycard US, a unit of Barclays PLC, are Isis’ initial partners.
On June 21, Isis said it plans to test the service in Austin in the first half of 2012 (see story). Earlier this year it announced a pilot with the Utah Transit Authority in Salt Lake City next year (see story). The Salt Lake City test will also be open to merchants outside of transit, Johnson said.
Johnson said the venture had no announcements about specific merchants that were planning to partner on the service, though any retailer that already has a terminal that can read contactless payment cards would also be able to accept a payment through Isis. For merchants that want to use a loyalty offers service that will be included in Isis, additional software upgrades will be involved, Johnson said.
When the pilots launch, Isis will be “a fully commercially available offer, which means” consumers will be able to “go into any carrier store, select from multiple” handsets and “load your choice of credit card or payment products” into the app, Johnson said.
To get retailers on board, Isis is working with existing providers like merchant acquirers and independent sales organizations to market the service and is marketing directly to large merchants.
