Isis Tightens Mobile Wallet Race with Serve Integration, Chase Commitment (August 2013)

By Kate Fitzgerald, Emerging Payments Editor 

Isis, the mobile wallet system backed by AT&T Mobility, T-Mobile, Verizon and three major card networks, is gathering steam as it nears its national rollout, with a new co-branding effort with American Express Co.’s Serve payments platform providing the latest push forward.

Amex earlier this month announced plans to integrate its Serve payments platform, featuring a prepaid card and mobile app, with Isis when it rolls out nationally later this year. The move seals Amex’s participation in the venture beyond the nine-month NFC-based test Isis launched last fall in Salt Lake City and Austin, Texas. Isis was formed in 2010 with Discover Financial Services as its first payments network partner, and after several delays Isis launched its pilot in 2012, enabling users to tap their phones to pay at merchants with NFC technology. Chase, Capital One and American Express also are card-issuing partners with the venture. Isis has not disclosed the date of its national launch, but Chase last week notified Isis users that after Sept. 13 it will shut down the Isis Cash Prepaid Card accounts it offered during the pilot.

Chase at the same time gave its stamp of approval to Isis, announcing plans last week to expand its participation with Isis beyond the pilot phase, which Chase said generated “positive results.”  When Isis launches broadly, Chase will enable its various credit card brands—including Chase Freedom and its Sapphire and JPMorgan Palladium brands targeting affluent customers—to operate with Isis when it becomes available across the U.S. In April Isis said it supports NFC-equipped vending machine payments nationwide.

‘Valuable Insights’

Capital One Financial Corp., also on board during Isis’ pilot, remains coy about its commitment to the concept going forward. “The Isis pilot provided valuable insights into how customers use mobile payments,” a Capital One spokesperson tells Paybefore. “We believe it’s important to participate in multiple mobile pilots as the industry continues to evolve quickly,” he adds.

When Isis in late July unveiled its national rollout plans it declared the pilot a success, pointing to examples such as Jamba Juice, which sent offers to users via their mobile handsets and traced that activity to driving higher foot traffic plus more visits from first-time customers. Isis noted that 30 different U.S. mobile devices support Isis and “support for iPhone” is expected later this year. Apple Inc. on Sept. 10 is expected to announce a new iPhone model, but analysts are skeptical about whether it would be NFC-compatible. Isis users instead will adapt iPhones to Isis with an NFC-enabling sleeve, according to Rick Oglesby, a senior analyst with Aite Group.

Amex’s Serve has some features that overlap with Isis, but Amex says the integration of Serve in every Isis mobile wallet will enhance convenience for Servers users, so they can tap to pay and easily access their Serve accounts within the Isis wallet. “Linking the platforms will allow millions of people to conveniently and inexpensively manage and move their money,” said Dan Schulman, Amex’s group president of enterprise growth.

Serve, launched in 2011, enables users to make online or POS purchases, pay bills online and send funds to other Serve users. Serve users may add funds from any payment card, bank account for from Green Dot Corp.’s MoneyPak and withdraw cash free from MoneyPass ATMs.

Complementary Platforms   

The Isis-Serve linkup is not surprising because mobile wallets are still in the early-construction phase and such partnerships will be crucial to their development, Oglesby observes. Payments industry players are lining up to invest in major marketing efforts to try to create consumer awareness and interest in mobile payments, but it will require extensive experimentation  before mass numbers of consumers may grasp its value and adopt it, he says. “What we are seeing is the foundation falling into place with mobile and digital wallets. Once the foundation is there, the rest will get designed and built on the fly through iterations. This is not a pre-planned blueprint,” according to Oglesby.

Bringing Isis together with Serve benefits both sides, Oglesby contends. “Both Isis and American Express bring consumer marketing assets—Isis via the carriers’ devices and mobile broadband distribution channels, and Amex via its proprietary and partner marketing and sales channels.” The two payment platforms also complement one another, as Serve is cloud-based and Isis has a secure element-based NFC foundation, he adds. The combination helps to maximize the capabilities of each company’s m-payments offering and extends value in both directions, Oglesby believes.

Isis still has a long way to go before it can declare success, analysts agree. Some observers are not sure whether Isis has hit on a winning formula. “While we recognize the robustness of Serve, we remain unconfident about Isis,” Brian Riley, senior research director with CEB TowerGroup, tells Paybefore, noting that it has taken three years for Isis to get off the ground yet it has not delivered any dramatic benefits for merchants, such as transaction-processing efficiencies or cost saving.

The Isis app is not the easiest in the world to navigate, adds James Wester, global payments research director for IDC Financial Insights, who dubs the process “not intuitive,” with many steps involved to add cards. But including Serve should be a plus for Isis, Wester believes. “By adding a prepaid option from Serve, Isis gets a prepaid card option and a partner in American Express that is doing smart things with mobile and social,” he says. As for Serve, linking with Isis may help promote its usage to a broader audience. “[Serve] is a great prepaid account that has some clever tools,” says Wester.

Competitive Pressures Mount

Competitive pressure in the m-payments arena is mounting. MCX, the retailer-led mobile commerce venture announced last year with participants, including Walmart, Target and 7-Eleven, is gathering momentum as it nails down the elements of its own new system. MCX last month named a CEO and said financial technology provider FIS will provide the MCX payment platform, three months after deciding that Gemalto will provide its mobile wallet software.

While this year had brought a bumper crop of news of new m-payments startups and pilots, one of the most significant items may be last week’s announcement that Facebook within the next month plans to make its first m-commerce move, testing a system enabling consumers who stored payment card credentials with the social media giant to make purchases using a Facebook login.

Separately, Google Wallet, which also poses a competitive threat, remains in flux and continues to rearrange its offerings. The company recently let users know it is discontinuing NFC redemption for gift and loyalty cards stored in Google Wallet, though its physical loyalty and gift cards are unaffected by the change.

What all this means is that the mobile and digital wallet ecosystem is in a “massive test-and-learn” mode, David W. Schropfer, head of mobile commerce at the Luciano Group, tells Paybefore. “Wallet providers are trying to figure out the revenue model and the operational model at the same time. The payoff for the company that builds a profitable, well-adopted mobile wallet business model will be extraordinary,” he explains. “With stakes that high, willingness to invest, test, learn and change is high.”