AT&T, Verizon Wireless, and T-Mobile USA are scaling back plans for a mobile payment system that will allow people to buy things with their cell phones, according to a report in The Wall Street Journal today.
In November the companies announced that they had formed an alliance with credit card company Discover to build their own mobile payment network. The joint venture was known as Isis. The plan called for the carriers to set up their own payment and transaction network that would charge fees based on transactions. The business model would have put the wireless operators in direct competition with credit card powerhouses Visa and MasterCard.
But now sources close to the project have told the Journal that the carriers are not planning to set up a separate payment network. Instead, they plan to set up a "mobile wallet," that can store and exchange account information from credit cards that subscribers already use. As part of this plan, the carriers are in talks with Visa and MasterCard to have them participate in the payment offering. Then they will work with handset makers to embed the information and technology into devices.
The main reason for the shift in strategy is that setting up a separate network is too difficult and time-consuming, sources told the Journal.
Discover was to be the credit card payment partner and Barclaycard was to be the first bank/lender to work with the joint venture. The Journal article said that Discover remains a partner, but a spokesman for the carriers said that the group is also open to new alliances.
The shift in strategy is significant because it will hopefully bring mobile payments to the market much quicker. The idea of using a cell phone to pay for things has been around for a while. But it's been slow to evolve in a commercial setting in the U.S. Wireless operators, handset makers, and other companies, such as Google, have all tested the concept, using near-field communications, or NFC, technology, which allows for the secure wireless transmission of data over very short distances.
But so far, the concept has not been brought to life widely in commercial deployments in the U.S.
That may soon change as the race for mobile payments heats up. Google's latest version of its Android operating system supports NFC technology, and the company is working with MasterCard and Citigroup to embed NFC technology in smartphones. Google's Nexus S smartphone already has an NFC chip embedded.
Research In Motion, the maker of BlackBerry smartphones, is also working with MasterCard and Bank of America to allow people to use their phones to make mobile payments. The companies are already testing the service in New York City. And they plan to extend the trial to San Francisco and Atlanta in a few months. RIM has also said that new BlackBerry smartphones introduced this year will have NFC chips embedded.
The big battle in the mobile payment market will likely come as wireless operators, handset makers, and software companies such as Google battle for control over wireless subscribers' information.
The Wall Street Journal reports that wireless companies want to store users' personal credentials in the phone's SIM card, which is used to activate a phone on a wireless network and would give the carrier access to that information. But device makers and Google would rather the information be stored on NFC chips embedded in the devices, which would cut carriers out of the payment and would give more leverage to device makers and the companies that develop the device OS, such as Google.