A mobile-device payment venture headed by AT&T (NYSE:T), Verizon (NYSE:VZ), and Deutsche Telekom’s (PINK:DTEGY) T-Mobile has acquired point-of-sale partners, pushing the project closer to launch. POS companies VeriFone (NYSE:PAY), VivoTech, Ingenico, and Equinox are the latest additions to the Isis project, which utilizes near-field communication (NFC) technology to allow owners of enabled smartphones to pay at the register with a wave of the phone.
Prior arrangements with payment networks and phone manufacturers are part of a strategy aimed at making Isis a competitor to the Google (NASDAQ:GOOG) Wallet system, which stores payment-card data, and related promotional offers, on your phone and online.
A mobile payment transaction involves several aspects that need to correlate for the transaction to process. The shopper must have a phone that is equipped with NFC hardware and a software “wallet,” or payment method, linked to the device. On the merchant side of the transaction, the merchant’s register needs to have specialized hardware that includes an NFC chip that’s capable of reading the signal that the phone’s hardware sends when a payment is authorized.
Isis had previously enlisted manufacturers such as HTC, LG (PINK:LGEAF), Research in Motion (NASDAQ:RIMM), and Sony (NYSE:SNE) to add Isis technology to their NFC-equipped smartphones. The four major payment networks—Visa (NYSE:V), American Express (NYSE:AXP), Discover (NYSE:DFS), and Mastercard (NYSE:MA)—announced their support of Isis transactions. The POS partners say they will help ensure that stores have the hardware needed to fulfill mobile sales as the companies promise to integrate Isis into all future products, such as register terminals. VeriFone alone provides about 70% of the POS equipment used by major retailers in the United States.
A market thick with competition
Isis is set to roll out this year, starting with test runs in Austin and Salt Lake City. The service will be joining a mobile payment market expected to become increasingly saturated in the next two to three years. Google has its Wallet, which is connected with Citigroup (NYSE:C) and Mastercard. Vodafone (NASDAQ:VOD) and Visa last week forged an agreement to bring mobile payments to the European market. PayPal has already rolled out its mobile payment system to 2,000 Home Depot stores.
Retailers including Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) are poised to launch their own mobile wallets in the near future, according to The Wall Street Journal. And this week Square, which allows credit card payment via mobile devices, announced Square Register, an application written for Apple’s (NASDAQ:AAPL) iPad that allows POS transactions while it provides product menus and tracks inventory and customer purchases—all without standard POS equipment and maintenance fees.
The frontrunner of the mobile payment race will end up being the service that has numerous supported mobile devices, solid system security, and extensive merchant support. Google Wallet is currently the most well known payment system but it can be used only on the Nexus S smartphone, faced two recent security breaches, and works at a small (albeit growing) group of stores.
Isis already has the benefit of associating with the largest telecom companies and payment networks, names that consumers are inclined to trust with a payment. Integration of the POS systems into a wide range of stores may be the deciding factor behind the success or failure of Isis.