Mobile wallet competition heats up

BARCELONA -- A mountain of issues must be solved before mobile payments take off in a major way, not the least of which is the very real challenge of getting consumers accustomed to paying with cash or plastic to buy into the idea.

Merchants, banks and other financial institutions, wireless providers, handset makers, and technology infrastructure companies all have to come together. Many of these companies are weighing in at Mobile World Congress this week, each tackling the problem from their own unique perspectives. Brand-name companies at the massive trade show include Google, Visa and eBay (PayPal). But there were also little known startups such as Boku, a venture-backed online mobile payments technology company that has just struck a deal with MasterCard.

Isis took a major step in its battle against the Google Wallet for eventual supremacy in the nascent mobile wallet space. The New York City-based joint venture formed by AT&T Mobility, T-Mobile USA and Verizon Wireless announced that Chase, Capital One and Barclaycard will let customers place their credit, debit and prepaid cards into the Isis Mobile Wallet. That will let folks shop with their phones at participating merchants. The Isis wallet is scheduled to kick off mid-year with pilots in Salt Lake City and Austin, Texas.

"We've got to make it really simple for the consumer out of the gate — real easy," CEO Michael Abbott told me during an interview at the show. The latest announcement follows last July's news that Isis had secured relations with the top four U.S. payment networks: Visa, MasterCard, Discover and American Express.

Isis provides a platform that enables banks and merchants to plug virtual versions of their plastic cards in a digital wallet. All data resides with banks and merchants and the consumer, not Isis. The wallet can store coupons, loyalty points and discount offers.

"Today, when is the first time a merchant knows when you've been in a store? When you leave," Abbott says. "Imagine now that on top of that they can interact and say, 'tap in when you walk in the store and we'll give you X, Y and Z.' Ask consumers what they want and they will tell you what they have. Our job is to give them what they never knew they needed."

The Isis approach, like Google's, exploits phones with near field communication (NFC) chips that make certain mobile transactions possible. More phones with NFC technology are coming. "At the end of the day, two things have to change," Abbott says. "The consumer experience, and the merchant has to most likely deploy something different. Our view, and we looked at all different technologies, is if you want something that is safe, secure, fast and efficient — meaning it also keeps the cost structure down for all the various ecosystem players — we believe as it stands NFC is the best technology out there."

But not every mobile payments company believes in the NFC approach.

PayPal says it did $4 billion in mobile payments last year and expects to process more than $7 billion in 2012. It was $150 million as recently as 2009. At Mobile World Congress, it launched the PayPal Carrier Payment Network to make mobile payments available to more online merchants.

For consumers who don't want to use a phone, PayPal issues a payment card that is a physical incarnation of your wallet in the cloud where all your credit cards, debit cards, loyalty programs and so on are stored.

"We've had a wallet for 13 years — we have 106 million active users," says PayPal vice president for mobile David Marcus. Now they just happen to use it on mobile, he says.

Marcus says PayPal is technology-agnostic. "We see a multichannel world where you want to pay on your PC, on your mobile, in a store. We're not going to bet the farm on NFC or on tapping your phone versus swiping."

For his part, Abbott sees the various alternatives as a positive.

"Mobile payments are coming. All these alternatives are good because they get the consumers, the merchants and the banks moving forward. It gets everybody talking about it and simply adds to the gravity of mobile payments becoming a reality," he says.