Mobile wallets could soon become a reality with Verizon, AT&T, and T-Mobile announcing partnerships with Isis, the national mobile commerce platform. These three carriers have built the network called Isis, in order to enable payments at the point-of-sale using their mobiles instead of cards.
These networks use near field technology, as well as smart phones to conduct the mobile payments. This will be launched in about 18 months. Discover Financial Services, as well as Barclays have been bought into this network in order to make contactless payments a reality.
The technology used by NFC is a high frequency, short range and wireless technology, in order to get the encrypted messages across to different devices.
The CEO of Isis is the former executive of GE Capital, Michael Abbott. He has reiterated the basic vision, and stated that they plan to create a mobile wallet that would finally eliminate the need to carry cash, debit or credit cards. The mobile payment products would greatly reduce the need to carry forward reward cards, tickets or coupons of any kind.
This technology is based on the same principal of radio-frequency identification, (RFID technology), where there is an embedded chip or in some cases the antenna, that would allow customers to make a payment by just waving the card or the smart phone near the point-of-sale.
This would in turn pose stiff competition to both Visa and MasterCard, as there would be an alternative mode of payment thereby saving the transaction fee for the retailers.
The current payment structure is based on the network, which connects the players, banks as well as clearing houses. In order to develop another alternate mode of payment, these providers require a vast coding system, which is currently being handled by the likes of Amazon, IP commerce as well as PayPal.
The basic business model of both MasterCard and Visa revolves around the percentage that is charged on the merchant discount in order to provide the services of the network. But as the connectivity through Wi-Fi takes over in the new applications, vendors would be able to bypass this rail.
These three carriers assist in the connectivity aspect in order to facilitate payments. However, the contactless payment option show signs of different partnerships expected in the near future, in order to create alternative payment modes. Currently, Discover Financial Services are being used to create a mobile payment product. This would certainly be a threat to Visa as well as MasterCard.