Isis, the wireless carrier-led mobile payments joint venture, plans to pilot its service in Austin, Texas, next year.
The venture said Wednesday that it is working with local merchants there to deploy the system, which would allow consumers to pay for purchases using their smartphones. It earlier announced plans to also test the service next year in Salt Lake City with the Utah Transit Authority.
"Austin is home to progressive and tech savvy consumers and merchants - a key demographic for Isis' mobile commerce program. The city's culture of innovation, thriving business community and early adopters make it an ideal launch market for Isis," Michael Abbott, the chief executive of Isis, said in a press release.
In November, AT&T Inc., T-Mobile USA and Verizon Wireless announced the venture's formation. Discover Financial Services will route transactions made with Isis over its network, and the carriers have said they are open to working with other card companies. The venture also signed on Barclaycard US, a part of Barclays PLC, which would be one of the first issuers of Isis accounts.
The Austin test is expected to start in the first half of next year, Isis said. Consumers in Austin would use phones equipped with a technology called near-field communication to make point of sale purchases by waving a phone close to a special merchant terminal.
In an interview in May, Isis Chief Marketing Officer Ryan Hughes said the venture was in discussions with banks about partnering on the mobile wallet application, which would be used to manage a customer's payment card information as well as store merchant offers.
Andy Hoar, a senior analyst who studies merchant offer services with Forrester Research Inc., said that if done correctly, merchant offers could help drive the adoption of mobile wallet applications.
To succeed, any mobile payment system "has to be an improvement upon what is already an existing process," Hoar said in an interview on Wednesday. "If you can't improve upon the swipe of a card, then chances are your adoption rates aren't going to be very impressive despite the fact that it's convenient [and] it's cool."
But to attract merchants, the offers themselves have to be more than a blanket discount, Hoar said. Retailers are more interested in services that can provide data on what prompted a consumer to use an offer as well as ones that drive specific behavior.
Isis is in close competition with Google Inc., which in May announced its own mobile payments system that it is testing in San Francisco and New York this summer. The service, Google Wallet, will also work with NFC smartphones and allow consumers to make payments and redeem offers. Google's initial partners are Citigroup Inc., MasterCard Inc. and Sprint Nextel Corp.
Andrew Jeffrey, an analyst with SunTrust, Robinson, Humphrey, wrote in a research note published on Wednesday that "there is a business case for physical-world mobile payments if providers can integrate real-time value added solutions for customers" into the systems.
Mobile payments providers also face "the chicken-and-egg challenge of consumer and merchant adoption, division of economics between the parties, ability to quantify the economic benefits to retailers and consumers and questions of wallet structure and funding mechanisms."