AT&T: Debit card regulations forced new Isis m-commerce strategy

AT&T (NYSE:T) said new debit card regulations forced the operator and partners its Verizon Wireless (NYSE:VZ) and T-Mobile USA to overhaul their plans for Isis, the nationwide mobile commerce network originally designed to compete with traditional credit card giants Visa and MasterCard.

Click here to watch a video about Isis mobile payments.

Earlier this month, Isis confirmed it will no longer roll out its own Near Field Communications-enabled contactless payment network, instead opening its system to interested credit issuers and banks and aligning with existing m-payment infrastructure. Although Isis has long maintained plans to open its ranks to all interested merchants, banks and mobile carriers, the company said unexpectedly strong interest prompted the decision to accelerate the approach far earlier than anticipated.

In an interview with Reuters, however, AT&T head of business solutions John Stankey said the Dodd-Frank financial reform law also played a significant role in the Isis overhaul--the law's "Durbin amendment" vows to make payment processing less profitable by limiting the fees that merchants pay banks and networks whenever a customer completes a purchase using a debit card.

"Some changes in the banking laws occurred with the amendments that were put in with the Dodd-Frank bill... As transaction fees were limited and things were changed, it kind of changed the business model," Stankey said. He nevertheless reiterated that Isis planned all along to open its system to "all parties" over time, adding "Frankly, it just happened a little bit sooner than probably what we would have guessed."

The Dodd-Frank bill is expected to slash annual debit process fee revenues from $23 billion to about $10 billion. The Federal Reserve must still finalize the proposed restrictions, slated to go into effect in July--the U.S. banking industry is actively seeking to delay the new regulations.

Despite its revised gameplan, Isis has stated its ultimate ambitions remain unchanged: The company hopes to develop a mobile wallet solution that effectively renders obsolete cash, credit and debit cards, loyalty cards, coupons, tickets and transit passes.

"Payments are an important part of it, but it's also about the mobilization of loyalty programs, delivering offers and redeeming coupons," Isis head of marketing Jaymee Johnson recently told FierceMobileContent. "That is the larger system that Isis is building. A broader mobile commerce platform is still fundamentally what Isis is about. Mobile commerce takes a degree of connective tissue between [the mobile industry, the payment industry and merchants] that today doesn't exist. Isis looks to be the bridging technology between those platforms."

Isis still plans to team with Salt Lake City-area merchants and business leaders to roll out a pilot program slated to go live in early-to-mid-2012. In addition, Johnson said Isis is poised to announce its second test market sometime in the next several weeks.

For more:
- read this Reuters article

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