Isis needs it to. The company is planning tests of its service next year in Austin, Texas, and Salt Lake City. Right now there is only one handset currently available in the United States with a near-field communication chip that can handle payments: Google Inc.'s Nexus S Android smartphone. It has been linked to Google Wallet, a mobile payment service that competes with Isis.
However, manufacturers including Research In Motion Ltd., Nokia Oyj and others have said they plan to include support for NFC applications in some or all of their future handsets.
"The handset pipeline around NFC is basically just about to explode," Jaymee Johnson, the head of marketing for Isis, said Wednesday. "That will change pretty dramatically … by the early part of next year and really the end part of this year."
For mobile payments systems like Isis and Google Wallet to work, a significant number of NFC handsets must get into the U.S. consumers' hands. Both services would allow consumers to load their existing credit cards into a smartphone application known as a mobile wallet. They could use their NFC phones to make purchases with these cards by waving their handsets in front of special merchant terminals, another piece of technology necessary for the systems to take off.
Juniper Research estimated in April that one in five smartphones will have NFC functionality in the next three years. North America will account for half of all NFC smartphones in 2014, the research firm said.
Until enough NFC handsets are available, companies may need to pair "interim solutions" with their systems so consumers can use existing smartphones to make payments, said David Schropfer, a partner with the telecommunications consulting firm Luciano Group in Red Bank, N.J.
For example, DeviceFidelity Inc. markets an add-on product that uses an external memory card, containing an NFC antenna, that can be inserted into some smartphones. For Apple Inc.'s iPhone, which does not have space for an external memory card, consumers can use a special case that holds the DeviceFidelity card.
DeviceFidelity is working with Visa Inc. and MasterCard Inc. on pilot tests of its technology with some of the card networks' issuing banks.
Without using such technology, Isis and others are "simply not going to have enough customers to make a meaningful impression on the marketplace," Schropfer said. However, "customers that do have the technology required in their phones, who have NFC, and can use the Isis service when it rolls out in Salt Lake and Austin … will have a remarkable experience."
Johnson said the focus of Isis is on using smartphones with embedded NFC technology, though the venture is also investigating "bridging technologies" in the short term.
AT&T Inc., T-Mobile USA and Verizon Wireless in November announced the formation of Isis, which is planning to work with multiple banks and card networks. Discover Financial Services and Barclaycard US, a unit of Barclays PLC, are Isis' initial partners.
On Tuesday, Isis said it plans to test the service in Austin in the first half of 2012. Earlier this year it announced a pilot with the Utah Transit Authority in Salt Lake City next year. The Salt Lake City test will also be open to merchants outside of transit, Johnson said.
Johnson said the venture had no announcements about specific merchants that were planning to partner on the service, though any retailer with a terminal that can read contactless payment cards would also be able to accept a payment through Isis. For merchants that want to use a loyalty offers service to be be included in Isis, additional software upgrades will be involved, Johnson said.
