When Isis announced it would abandon plans to form its own payment network it was a clear indication that the telco carriers are willing to be assimilated in to the existing transaction player’s systems. In many ways this consolidation is a good thing for the advancement of NFC transactions and the mobile wallet.
From NFC Times:
“By partnering with the dominant players—Visa and MasterCard—the wireless carriers are making the right moves to create an ecosystem that will allow consumers to become comfortable with making NFC payments through their cell phones,” said Jagdish Rebello, director and principal analyst for communications and consumer electronics with IHS, in a statement today. “Such a move will drive an increase in unit shipments of cell phones with embedded NFC capability in the United States and around the world.”
Isis recently tried to reframe its decision, referencing recent legislation that changed the processing fee structure for debit transaction fees. Wireless Weekly expands on the agruement with statements from Isis rep Jaymee Johnson.
From Wireless Weekly:
“As Johnson explains it, Isis was forced to re-evaluate its strategy after financial reform legislation made it more difficult for companies like itself to make money off payment networks.
Isis had planned to charge lower fees than existing payment networks, enticing merchants to sign up for the service. However, an amendment from Sen. Dick Durbin’s (D-Ill.) in a major financial reform bill passed last summer put limits on the amount of money large banks could charge merchants on swipe fees for debit cards.
“Previously, merchants saw potential in mobile, but the most tangible reason to adopt it was to reduce the acceptance costs they pay [for debit card transactions],” Johnson says. “In the post-Durbin world, merchants had achieved the reduction in acceptance costs they were looking for and weren’t really in a position to favor one method of payment over another.”
Before the Federal Reserve issued its proposal in December, Isis had believed merchants would quickly adopt its mobile payments service because it would reduce the cost of electronic payments. Swipe fees charged by banks and credit card companies posed substantial costs for retailers before the passing of Durbin’s amendment.
This left Isis in a sticky spot. Merchants were the third leg of the stool needed to get the joint venture’s NFC-based mobile payment business off the ground – without NFC terminals at the point of sale, there was no way for consumers to use their NFC-enabled smartphones to pay for transactions. But with the passing of the Durbin amendment, retailers had no incentive to adopt Isis’ payment services – the fees had just been cut on their existing credit card services, so they had no reason to shoulder the cost of an additional payment network.
“They weren’t likely to have any bias toward one payment network over another because all the payment networks were cheaper,” Johnson says. “That posed a question about how to go to market.”