Tap-to-pay: A mobile phone “wallet” developed by a consortium of phone companies will store credit card information and transmit it to a store scanner, at rear.
Dry cleaners, sandwich shops, and hardware stores in Salt Lake City and Austin, Texas, have been getting visits from salespeople working for a joint venture among three of the four leading U.S. mobile carriers: Verizon, AT&T, and T-Mobile.
But these pitchmen aren’t selling wireless plans. Rather, they’re hawking software that works on new point-of-sale terminals costing about $100 and allows payment from “mobile wallets”—smart phones loaded with special chips that can transmit credit-card information and receive store offers.
The salespeople are foot soldiers in a nascent but widening ground war. The three-carrier consortium, called Isis, is planning to launch a mobile payment service in those two cities this summer—one year after Google launched its own effort, called Google Wallet, allied with the fourth major carrier, Sprint Nextel.
Mobile phone plans are a big business—operators collected $170 billion in 2011—but revenue per user has started to flatline. Instead, consumers are spending more and more on games and apps that run on phones but aren’t actually sold by carriers.
Isis, formed in November 2010, is the carriers’ attempt to draw a line at payments. “This is a big opportunity for the mobile industry,” says Jaymee Johnson, head of marketing for Isis, which employs several hundred people in New York, Dallas, and Seattle. “The payment industry is larger than the entire wireless industry.”
Isis says its business model doesn’t involve a direct cut of the credit-card fees charged to merchants. Rather, issuers are expected to pay to get their cards carried in the wallet, and merchants would pay to extend loyalty rewards and redeem special offers—replacing the little dongles that hang off your car keys.
“The carriers are facing the risk that Google is going to take over the lucrative slices of mobile business,” says Gwenn Bézard, research director with the Aite Group, a Boston-based research firm. “With Isis, they are trying to create a platform where they will be able to compete—not just on payments, but on all the marketing that will be associated with them.”