Mobile payment pilot coming to Salt Lake in 2012

Fine, analysts say, but will the credit card companies and banks all get along?

Isis, a joint venture of three U.S. wireless carriers, on Tuesday announced that it's planning a pilot of smartphone-based mobile wallet technology in Salt Lake City in 2012.

However, deploying and using the the Isis trial's primary technology, called Near Field Communications (NFC), could turn out to be the easiest part of the project, which will include tests of multiple wireless handsets using multiple operating systems.

The bigger worry is whether the companies in the Isis network will cooperate with Visa, MasterCard, American Express and other companies, including Apple and PayPal, that reportedly have their own mobile payment projects in the works.

Isis, created last November by AT&T Mobility, Verizon Wireless and T-Mobile USA, includes Discover Financial Services and Barclaycard U.S. in its venture.

The Salt Lake City pilot system will be deployed with the Utah Transit Authority (UTA) and area merchants. The UTA already has many contactless-payment terminal readers that are used with NFC-ready credit cards carried by passengers who travel on buses and commuter and light rail trains, an Isis spokesman said.

In its announcement of the Salt Lake City project, Isis said it's willing to work with other payment networks, banks and mobile networks, but analysts were skeptical, noting that banks and payment networks were already highly competitive in the U.S. even before NFC technology opened up a completely new market.

"We're in the midst of a land grab, and a lot of [mobile payment] players want to own that mobile wallet," said Nick Holland, an analyst at Yankee Group. "If the players don't sort this out, it could be very messy for the end user experience and that could cripple mobile payments."

If multiple mobile payment networks evolve in the U.S. without being somehow unified, consumers could be required to have multiple applications (and icons) on a single smartphone, each activated in a different way and each backed by a different bank or credit card, Holland and other analysts said. If that happens, using an NFC-ready smartphone wouldn't be much better than carrying three or more credit cards today.

"The NFC technology is irrelevant if people can't use it conveniently," Holland added. "Maybe we'll end up with multiple mobile wallets per person."

Visa already has several mobile wallet pilots underway in New York, San Francisco and Washington, and it's working with four major banks and using several smartphone operating systems, Visa spokeswoman Elvira Swanson said Tuesday. Visa is "fairly close to moving beyond the pilot, and we're looking at commencing [mobile payment] launches in the not-too-distant future," she added.

Swanson emphasized that Visa's approach is to give customers mobile access to their existing credit card accounts, not ask them to set up new accounts -- as they might have to do with Isis. "We want to give consumers access to the accounts they already have in their wallets, and we don't want to introduce friction as we roll out mobile payments so that people have to open a new account," she said.

To participate in the Isis Salt Lake City pilot, a customer would presumably have to register for a Discover card account backed by Barclaybank to use the network, unless Isis can get Visa, MasterCard or other credit cards and banks to cooperate with its endeavor, said Bob Egan, an analyst at The Sepharim Group.

"Technology is the least of anybody's worries with mobile payments in the U.S.," Egan said. "The real struggle is what the Isis business plan looks like. One of the continuing tensions in this industry is between issuing banks and alliances like Visa and MasterCard in how they redistribute wealth" from traditional credit card purchases -- and now from mobile banking.

Isis will probably attempt to forge relationships with the largest credit card companies, since Discover is either No. 3 or No. 4 and it's unlikely that many consumers and transit riders in Salt Lake City use its cards, Egan noted. Having Isis and its three wireless carriers involved in the Salt Lake City pilot only complicates the business model, he added.

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