Carriers No Match for Credit Card Companies in Mobile Payments: Report

Posted: 5/26/2011

Isis, the collaborative mobile payments venture initiated by three major U.S. telecom carriers, is scaling back its efforts to compete with the credit card industry.

Created in a joint effort by T-Mobile, Verizon and AT&T, Isis first aimed to allow customers to pay for purchases at retailers by using their smartphones, with a network of payments independent of credit card companies. Purchases and account information would have been handled by the carriers.

Instead, Isis now has its sights set somewhat lower. According to sources who talked to The Wall Street Journal, Isis is now working to produce a sort of "mobile wallet." Customers will still use their smartphones to pay for purchases, but instead of an independent payment network ran by the carriers, the phones will use your existing credit card information.

"Visa and MasterCard are so universal at this point that the barriers to entry for any new payment system are almost insurmountable," IDC analyst Aaron McPherson told in an interview last year. Isis had already enlisted the help of Discover Financial Services to start the venture's payment system. But Discover is no Visa or MasterCard, and merchants weren't keen on the idea of cutting out the two giants.

And why should they? There's really no need to reinvent the wheel, just to create an enabling technology which leverages the parts that already work, and make it better. The point is to replace a wallet full of cards, not create new cards.

Isis is currently in talks with Visa and Mastercard to broker the deal in which card information will be embedded into customers' smartphones, according to The Journal's sources.

With the proliferation of NFC-enabled smartphones like Samsung's Nexus S, the upcoming Galaxy S 2, and Research in Motion's BlackBerry Bold, companies are fighting to enter the mobile payments space. Google is reportedly working on its own mobile payments system with Visa and Mastercard, which is to be tested in four key markets within the coming months.