The smartphone has transformed the telephone, the digital camera, the music player, the software industry, the traditional PC, and much more. But, its over-hyped efforts to revolutionize the wallet have fallen flat so far. CTIA MobileCON tackled mobile payments head-on by making it the subject of the opening keynote on Wednesday afternoon in the heart of Silicon Valley. While the panel wavered on a timeframe for mass adoption, they did talk up the new mobile wallet solution from the U.S. wireless carriers that is on the brink of a nationwide rollout.
The keynote was a panel that featured Verizon Wireless CEO Dan Mead as the moderator, along with panelits Dan Schulman from American Express, Jamba Juice CEO James White, and Michael Abbott, CEO of mobile payment company Isis. In fact, the panel turned into a bit of an Isis pitch with some general mobile payment perspective sprinkled in.
Isis is a joint venture between Verizon, AT&T, and T-Mobile in the U.S., and it uses NFC, a special SIM card, and the existing contactless payment terminals that many retailers have already installed. It's an effort to reduce complexity and create standards, but it's stiff facing competition from Google, Visa, PayPal, and others. In the U.S., payments is a 4 trillion dollar industry and all of the major U.S. financial institutions as well as many new entrants are positioning themselves to grab a piece of it. There's very little cooperation between competing systems.
"The mobile phone has taken over so much," said Abbott, "but it hasn't taken over your wallet. It's a tremendous opportunity to make it happen but we've got to make it incredibly simple."
Whether Isis makes it simple enough is an open debate. It requires a high-security SIM card and it's only available on select Android devices that have NFC. Isis is working on a special sleeve for Apple iPhone users since the iPhone doesn't have NFC, but that's not a very promising option for the iOS platform that owns about half of the U.S. smartphone market.
For mobile payments, Abbott stressed that the real competition is plastic credit cards. He said mobile payments have got to be better and simpler than credit cards so that customers say "I'll never go back to plastic." One of the killer features for doing that, he believes, is showing your real-time account balance at-a-glance before you pay.
"It's not just a from factor change" from plastic to digital that's important, Schulman stated. It's about "redefining how people manage and move their money." He talked about how expensive it can be to be poor, where you have to operate in cash and aren't part of mainstream financial services. That's 70 million people in the United States. A lot of these folks already have smartphones and mobile payments could change the game for them.
Schulman emphasized that the Internet is a "digital tornado" that redefines business markets and creates new opportunities. That's the reason he left the mobile industry after stints at AT&T and Virgin Mobile and went to American Express, where he wants to use digital wallet technology to transform AMEX from an exclusive brand to an inclusive brand.
"We're extremely excited to be part of this effort to democratize the management and movement of money," he said.
Isis is the solution that all of these leaders are betting on in the near term. That's no surprise since Isis is a carrier solution and all of them are Isis partners, and the CTIA itself is a carrier organization. Nevertheless, the success or failure of Isis over the next year will tell us a lot about the current state of mobile payments. The service is currently in trial in Salt Lake City, Utah and Austin, Texas, but is on track for a nationwide rollout across the U.S. by the end of 2013.
One of the key Isis retail partners is Jamba Juice, the popular juice bar and smoothie-maker. On Wednesday at MobileCON, Jamba Juice and Isis announced a Million Smoothie Giveaway in which the first million customers who use Isis Mobile Wallet to pay will receive a free smoothie. The fact that they announed this at MobileCON this week likely means that the nationwide rollout is imminent.
Jamba Juice's White stated, "We do over a 100 million transactions annually and we actually believe the digital wallets are more secure than transactions with credit cards."
White also noted that mobile payments will allow Jamba Juice to increase customer loyalty by combining payment and loyalty cards into one system that will allow the juice bar to send special offers to its customers.
Schulman put it another way. "The holy grail is the data and information around the transaction and not the form factor change."
Some privacy-conscious consumers will be uneasy with that, and so companies will need to provide tangible value in exchange for that privacy invasion, like the way Android has done with Google Now. Speaking of Google, of course it has a horse in this race as well with Google Wallet, which is the mobile payment system that is most known to consumers.
Isis and Google Wallet look like the two horses to watch in the U.S. over the next six months. We also have to expect Apple to enter the race at some point. It's no coincidence that it brags in its keynotes about the hundreds of millions of customer accounts that it already has in its ecosystem. And Amazon is in a similar position, and is aready making noises about setting up its own payments system. At best, in the near future we can probably hope for a plethora of barely compatible systems that each have their own apps and all use the same readers at retail locations. Even if mobile payments finally take off, there are likely to be lots of competing solutions with overlapping functionality.