Isis' chance of success is diminishing rapidly
Two years is a long time, especially in the hyper-accelerated mobile ecosystem. It hasn't even been two full years since Verizon Wireless (NYSE:VZ), AT&T (NYSE:T) and T-Mobile USA first announced plans to launch their Isis mobile commerce network (22 months, to be exact), but it seems like two decades have passed. Think about all that's happened in the interim: Square--not even a year old when Isis first came into being--is now processing more than $8 billion in mobile payments on an annualized basis (up from $1 billion last summer). In addition, the company just wrapped up a $200 million financing round and will expand its service to 7,000 Starbucks stores this fall. Square rival PayPal expects to handle $10 billion in mobile payment transactions in 2012, an increase of 150 percent over a year ago, and next year, Discover will enable all of its 7 million U.S. merchant partners to accept PayPal mobile wallet transactions in their stores. Even Isis counterpart Google (NASDAQ:GOOG) Wallet is picking up steam: Usage has doubled in the six weeks since Google rolled out a cloud-based version supporting all major credit and debit cards, although just how many consumers are actually using the Near Field Communications-based contactless payment app remains a secret.
It's becoming progressively more difficult to determine where Isis fits into this puzzle--or even if it fits, for that matter. Just hours after Apple (NASDAQ:AAPL) unveiled another edition of its iPhone without NFC support, Isis revealed it will miss its target summertime launch date because it is still fine-tuning the customer experience. Isis was slated to begin consumer trials by Sept. 21--the first day of autumn--but its kickoff is now delayed indefinitely: Jaymee Johnson, Isis's head of marketing, told FierceMobileContent the company will next update its status sometime in October, but maintains there are already "hundreds" of merchants in trial markets Austin, Texas, and Salt Lake City ready to support the m-commerce platform. Johnson also said that Isis remains "bullish" on NFC despite Apple's apparent antipathy towards the technology.
Critics are already asking whether Isis will ever go live, and it's a fair question. Here's an even better question: Should Isis go live? There are increasingly few reasons to think the network will ever gain traction in the marketplace. It's not only that Isis continues to fall further behind the competition with each successive day it spends in limbo--it's also that a business model that seemed perfectly viable in November 2010 now seems positively antiquated. Isis's commitment to NFC is the first strike: As long as Apple continues to keep the technology at arm's length, NFC-based payment services are never going to catch on with the kind of tech-savvy, early-adopter consumer segment (read: iPhone owners) a service like Isis desperately needs to attract.
Strike two: The Isis model seems far more restrictive than competing approaches. "Isis continues to adhere to a model of virtual cards downloaded to a secure element within the mobile device, a model where hypothetically it can charge banks for access to the mobile wallet," writes Yankee Group analyst Nick Holland. "With Google embracing the cloud, Isis is truly the odd man out. As with other operator 'walled garden' initiatives, Internet players win and Isis looks much like an operator app store of yore." Not to mention that Isis also suffers from NFC infrastructure requirements and corresponding hardware investments--by contrast, even the smallest business can afford to purchase a Square dongle or PayPal Here reader by collecting the loose change in the cushions of its break-room couch. "Why would a merchant choose a system that involves upgrading [point of sale] hardware just to move credit cards to a mobile form factor?" Holland asks rhetorically.
Strike three: Merchants of all shapes and sizes are already throwing their support behind rival mobile commerce services--or even building their own. As of June 2012, more than 2 million businesses and individuals across the U.S. are using Square, up from 1 million just six months earlier. More than 300,000 merchants in the U.S. and Hong Kong have signed up for PayPal Here since the service launched in March, and retail chains including Home Depot, Abercrombie & Fitch, American Eagle Outfitters, JCPenney, Foot Locker, Office Depot and Toys "R" Us are trialing PayPal's mobile wallet initiative. More than 200,000 MasterCard PayPass-enabled merchant terminals across the U.S. support Google Wallet, and another 3,000 merchant locations (including casual dining chains Johnny Rockets and Ben & Jerry's) are leveraging SCVNGR's QR code-based LevelUp payment service. And on top of all that, more than a dozen leading U.S. retailers including Walmart, Target and Best Buy will create their own nationwide m-commerce network, a move that could offer merchants unprecented control over the payment experience.
What's left for Isis? Not much. Isis maintains it will differentiate its service by delivering a more secure experience than conventional leather wallets, let alone virtual wallets: Johnson told FierceMobileContent that the Isis wallet is PIN-protected, and that a customer can call his carrier to have the contents of the wallet remotely wiped if his phone is lost or stolen. Security and reliability are cornerstones of any successful financial service, to be sure, but Isis needs more--much more--to compete. With each passing day, its chances for success and its reasons for being continue to diminish.--Jason