This comes to mind as the AT&T, Verizon and T-Mobile smartphone payment cabal unveiled itself Tuesday (Nov. 16) as ISIS. (This is the grouping that was widely reported back in August.) The group stressed the 200 million phone-wielding consumers they represent (as if Wal-Mart, Home Depot, Target and Macy's don't have their own huge installed base of mobile-equipped customers) and the ease of integration and various other talking points.
They stressed everything except the only thing that will ultimately persuade any major chains to support them: Revenue share, processing fees and other ways for retailers to say "Put a deal on the table that is sharply better than what I now have with Visa and I'll sign."
Jaymee Johnson is the director of strategic development for T-Mobile and he was acting as ISIS spokesperson in media interviews. Johnson spoke of "bringing enough compelling value to the merchant side," but did so without actually addressing interchange.
The ISIS argument is that its three members are going to drive the industry to Near Field Communication (NFC) and that NFC is the only practical way for mobile payments to happen. It is true that NFC will almost certainly be how mobile payments will be made, but that's going to happen regardless of what ISIS does. Therefore, support for NFC is not a reason to support ISIS.
"Today, in general circulation, there are effectively zero commercially-capable (NFC-friendly) handsets," Johnson said. He added that the ones used in various retail trials have done it two ways.
Some used stickers—hardly a longterm approach, which was discovered recently by Discover, which happens to doing the payment processing for ISIS. Others, Johnson said, "were handsets that were custom made with a soldering iron."
One of the group's plans is to offer a POS add-on kit for about $100 (much less with volume, of course) to help retailers more easily accept NFC payments. But again, if a retailer wants to accept NFC, it can easily do so without joining ISIS.
"Fundamentally, the problem that we're solving is not one of technology. It's more of a business problem," Johnson said. "We need to bring enough compelling value to the merchant side." Absolutely. But that's really about the money, right? "There is a value proposition about acceptance cost" and "interchange is a part of it."
He pointed to Starbucks' mobile trial—which the retailer is heralding as a success—as an example of where ISIS could make a difference.
If a retail chain "works hard, you can pull something off" such as Starbucks did, but "that retailer will have a ton of friction. They were in 16 stores and now they're doing it in New York. It's not available in Peoria. There's no scalable way. The iPhone has maybe a 10ish marketshare." He said that Starbucks is saying "I can enable something for a minority of stores for a minority of customers."
Although that is pretty much true, the conclusion he is drawing seems flawed. No matter what ISIS does, major telecom carriers—including but absolutely not limited to those that are behind ISIS—will continue to advance NFC and retailers will upgrade scanning equipment to support it.
ISIS shares in one point of confusion with the various so-called alternative payment players (BillMeLater, PayPal, Google Checkout, etc.). That shared confusion is that none of these players are actually going to be alternatives to the major card brands as they continue to pay the brands for using their networks.
ISIS, for example, won't allow consumers to have charges appear on their phone bills. Everything will be traditional credit, debit or prepaid and "the thrust will be in debit."
But ISIS is right about one thing: It really is about the value being delivered.