The 200 million wireless subscribers connected to AT&T Inc., T-Mobile USA Inc. and Verizon Communications Inc. may not be enough for the companies’ mobile payments joint venture to succeed; it still needs to attract large banks and merchants, one analyst says.
The carriers’ reach is a good asset for the joint venture, but the company still faces the challenge of getting multiple banks on board to expand consumer adoption, contends Gwenn Bézard, a senior analyst with the Aite Group LLC research firm in Boston.
“If it has a chance to succeed, they need to get on board major financial institutions,” he says.
The devil might be in the details, Bézard adds. “We have yet to see what are going to be the conditions for financial institutions, what’s going to be the costs, what are the fees that are going to be charged to financial institutions?” he says.
The telcos on Nov. 16 said their joint-venture company, JVL Ventures, is working with Discover Financial Services and Barclaycard US to operate a system called Isis that would enable consumers to use their mobile phones as contactless payment devices (
The carriers have tapped Michael Abbott, a veteran of General Electric Co.’s GE Capital arm, to serve as the venture's chief executive.
As news of the joint venture trickled out this summer, many industry analysts speculated that telcos were creating a private network that would be closed off to specific issuers.
Abbott stresses that is not the case.
“We’re open to all merchants,” Abbott said in a Nov. 16 interview. “We’re going to be open to all banks.”
Abbott declined to mention whether other banks will participate besides Barclaycard US, part of Barclays PLC, but said discussions are ongoing.
Discover’s involvement will help get merchants on board, he added. Discover claims to have 97% merchant acceptance in the U.S., though the percentage of retailers that know it is not that high (
“The strategic relationship with Discover really provides us broad-based reach to the merchant community from day one,” Abbott said. “It allows us to get to about 7 million merchants without having to reinvent the payments system.”
What do you think about this? Send us your feedback.
