Will Isis' Commitment to Near Field Communication Pay Off in 2014?

As more mobile wallets experiment with alternatives to Near Field Communication, Isis stuck to its use of the contactless payment technology. But will that prove to be a winning strategy or just a payments-industry fad?

The biggest setback Isis faced in 2013 was the lost support of two of its partner banks, Capital One and Barclays, which chose to not remain active participants after Isis' year-long pilots in Salt Lake City and Austin, Texas. However, Isis soon added a major endorsement from Wells Fargo, which said in mid-December that it would support the mobile wallet.

"It was extremely important for Isis to have brought in a partner like Wells Fargo," says industry analyst Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group, LLC. "Wells Fargo would not have jumped onto a sinking ship."

Isis, a joint venture of AT&T, Verizon Wireless and T-Mobile, reached its key goal for the year with a national rollout of the NFC-based mobile wallet in November. The launch coincided with a complete redesign of the Isis app.

"Isis still has a long way to go and there is nothing easy about [mobile wallet development], but Isis keeps after it and they are very well funded," Ablowitz says. "They've really shown their commitment and that's critical to a rollout like this because it takes years and a significant financial and institutional commitment."

JPMorgan Chase and American Express announced their commitment to the Isis wallet ahead of its national launch. Amex even replaced the Isis stored-value account with its own Serve prepaid card, turning the Isis app into something of a sales channel for Serve.

Isis did not make an executive available to provide insight about the joint venture's past year.

Isis also has the support of its merchants, and was featured prominently in a McDonald's ad that tells consumers how to use the mobile wallet.

Isis faces a continuous barrage of competition from giants like Google, which finally pushed its Google Wallet app onto AT&T, Verizon and T-Mobile phones despite the carriers' longstanding resistance to its model.

Google achieved this by shifting from its hardware-based NFC approach to a software-based one called Host Card Emulation. HCE allows an NFC phone to make contactless payments without deep hardware integration.

"Where Google is going with this is making a company like Isis change the way they look at the mobile wallet," says Doug Yeager, CEO of Austin-based SimplyTapp, a developer of HCE technology.

Isis is evaluating HCE, which is supported in the latest version of Google's Android operating system, the company said in November.

Others key players are distancing themselves further from NFC technology. PayPal Inc. and the developing Merchant Customer Exchange are outspoken in their commitment to software-based payment systems. PayPal's wallet uses the cloud and Bluetooth to communicate to merchants, whereas MCX is developing a system that uses QR codes.

Isis, however, remained committed to NFC technology this year.

"Why would you bet against the card brands? NFC is what they are doing, and it's a huge scale and infrastructure being built by the card brands, from terminals through phones," Tony Abruzzio, business development executive for Isis, said in an earlier interview with PaymentsSource.

However, there are limitations to using NFC. Notably, Apple has never included NFC technology in its iPhones and seems to be favoring an alternative in its use of Bluetooth Low Energy. A year ago, Isis said it would support NFC payments on iPhones through an attachment called Cashwrap.

"We have seen analysts lower expectations for NFC around the world, and we have seen more alternative approaches," Ablowitz says. "It's certainly a mixed bag, but Isis has shown they are very committed to this."

And the appearance of alternative mobile payment technologies doesn't mean the Isis model won't succeed, he says.

"The world of mobile payments is real complicated right now with business issues and technical issues," Ablowitz says. "And we haven't seen a mass adoption of mobile payment in any open loop system at all. Until we see that, the jury is still out."

Isis has expressed confidence that it will continue to add participating merchants and banks, while also seeing more NFC-enabled handsets and terminals hit the market. Isis found in its tests that consumers often used its app as a substitute for cash at gas pumps, convenience stores and fast-food locations.