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Have ISIS’ Summer Pilot Hopes Faded?

While summer does not officially end until September 22nd, the passing of Labor Day marks the unofficial transition to autumn and everything that comes with it—more temperate weather, back-to-school and shorter days. Along with the fading daylight hours, we think the hopes of the expected ISIS mobile wallet pilot tests in Austin, TX and Salt Lake City, UT are diminishing as well. ISIS (an m.wallet joint venture of three major US MNOs—AT&T, Verizon and T-Mobile) has long maintained that it would launch a planned two-city pilot of its m.wallet during summer 2012. However, considering summer is fading fast and the ongoing absence of any new pilot-related details from ISIS, it seems unlikely that these plans will come to fruition. VDC sees a number of challenges facing ISIS and m.wallet providers in general that could contribute to this delay:

  • Limited card choices for consumers—Only three credit cards may be used with the ISIS m.wallet: AMEX, Chase Freedom, and Capital One. This highly limited selection set reduces the population of prospective consumer users who could conceivably try ISIS during a pilot. While a highly-motivated early m.payment adopter might—and that’s a big might—make the effort to sign up for a new card just for the purpose of paying with their phone, this scenario will be the rare exception, not the rule. Just ask Google Wallet—that m.wallet solution launched with only one card partner and failed to gain traction with consumers. Google Wallet v2.0, which launched recently, now affords consumers the flexibility to use any card.
  • Infighting amongst key stakeholders—AT&T, Verizon and T-Mobile cooperating to develop, launch and operate a m.wallet app? To us, that sounds slightly more likely than The Coca-Cola Company and PepsiCo teaming up on a new beverage joint venture. In all seriousness, the ISIS consortium has made material progress so far, including recruiting a diverse range of over 100 merchant partners across its two test markets and developing an app that supports not just payment, but couponing and loyalty as well. However, there are numerous angles from which discord could emerge—revenue sharing, security-related issues, and even simple matters such as which smartphone models should or should not be made ISIS-capable could cause a rift in this partnership. If ISIS ultimately announces another official delay, disagreement(s) among the JV is a likely contributor.
  • The competition is fierce—and growing stronger—Although NFC-based m.wallet competition in the US is limited to Google Wallet at this time, in reality, should it ever launch, ISIS would compete against all m.wallet apps, not just those that are NFC-based. This means ISIS will face competition not just from Google, but from well-established merchant-centric m.payment apps (e.g., Starbucks), mobile barcode-based up-and-comers (e.g., LevelUp) and consumer technology giants (e.g., Apple’s upcoming Passbook app). As a result, we think ISIS could be reevaluating its strategy. Perhaps the ISIS JV may be reconsidering whether it wants to pursue mobile payments exclusively via NFC—or questioning whether m.payment fits into the MNOs’ strategies at all.

Of course, the possibility remains that ISIS could eke out a pilot before summer 2012 officially draws to a close. From our point of view, however, the odds seem to be stacked strongly against such a scenario. Only time will tell for certain, but we think the challenges outlined above—in addition to other potential roadblocks—could prevent ISIS from launching, both in the near-term and altogether.

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