Isis Outlines Transit Mobile-Payments Trial Set For Salt Lake City In 2010
The mobile-payment venture Isis, formed by major U.S. wireless carriers, is shaping its first major test around a lesson banks have learned with contactless payments: to change the way consumers pay, a payment system should change the way they get to work.
To this end, Isis has announced its plans for a 2012 pilot around the Utah Transit Authority’s system in Salt Lake City (see story). It is also planning to open its system up to other issuers and networks besides its launch participants, Barclays PLC and Discover Financial Services.
The Isis approach echoes that of Oyster, Transport for London’s contactless payment card consumers may use at a limited number of merchants near the transit system. It also resembles an approach by MasterCard Worldwide and Citigroup Inc. in a trial conducted in New York, where consumers may use open-loop cards, including those from rival Visa Inc., for fare underground and purchases at retailers above ground.
Clair Fiet, the Utah Transit Authority’s chief of business solutions and technology, says Isis takes this model a step further by incorporating mobile. One of the advantages around mobile is that it can provide loyalty benefits, such as instant coupons, to further encourage commuters to use the same payment method at the end of their travels.
In this regard Isis, the system created by AT&T Inc., Verizon Wireless and T-Mobile USA, is “not just the mobile” wow factor, Fiet says.
“Once you ride so many times, you can [receive] a coupon for one of the merchants along our line,” Fiet says.
Ryan Hughes, Isis’ head of marketing, says “transit … drew us to Utah.”
Other factors in its choice of Salt Lake City were “the demographic makeup, the smartphone penetration [and] the commuter profile,” Hughes says.
The Utah Transit Authority plans to allow fares to be purchased from Isis-enabled mobile phones systemwide by mid-2012. The transit agency has allowed fare purchases from contactless cards since 2009.
For its part in encouraging mobile payments to continue after the commute, Isis is talking to regional merchant acquirers and independent sales organizations.
“We need to be able to overload a market,” Hughes says. “Our solution needs to be ubiquitous, across the board.”
To succeed, “we … need Utah and the Salt Lake City merchants,” he says.
As a part of the pilot, Isis also announced it is opening up its network to other payment networks and issuers, much like MasterCard and Citi did for their New York trial.
Discover says its mobile-payment strategy goes beyond Isis, so it is not threatened by the addition of other players.
“While Isis remains a key component of our mobile strategy, we are far more interested in the widespread adoption of mobile commerce than we are in the success of any single initiative,” Discover said in an e-mailed statement. We “fully intend to participate in multiple wallets as both an issuer and network.”
Isis’ other launch partner, Barclays, is already deeply involved with London’s Oyster system. It issues a contactless card that combines with London’s Oyster card. A Barclays spokesperson did not respond to an April 5 request for comment.
Barclays’ card expands the functionality of the Oyster card by allowing it to be used for payments at any merchant that accepts contactless payments.
“The most important thing on a card system is that you have acceptance points,” says Brian Riley, a research director in the bank card practice at TowerGroup.
Cathleen Conforti, MasterCard senior vice president for global PayPass solutions, says although working with a transit system has its benefits, it also comes with challenges.
A new payment system must be able to accommodate “time-based [fares], pay as you go, senior citizen discounts, student rates, things like that–being able to accept transfers,” she says. It must do this without adding delay to the process of going through a turnstile.
MasterCard’s system in New York enables users to choose unlimited time-based fare options from a website. For those who have not enrolled online, the system works on a pay-as-you-go basis. It aggregates payments so avoid commuter delays at the turnstile by forcing cardholders to wait for a payment to be authorized.
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