In a major shift, Isis, the mobile payments venture headed by AT&T, Verizon Wireless and T-Mobile USA, which originally intended to compete with card issuers, now appears to have abandoned that tack, opting instead for a scaled-back effort that essentially amounts to data mining and revenues that might be built on sharing access to such data in some way.
The shift means an end to the "clash of giants" theme that had AT&T and Verizon challenging Visa and MasterCard directly as a payment processor. What new "story" might emerge remains unclear, for the moment, as Isis now will embark on a search for a new narrative.
Some will note that the shift in strategy solves one problem, but creates others. Isis no longer has to spend the time and capital to create a new retail payments brand, a prospect many had pointed out would be time-consuming and expensive. But the new model also must define and then create a viable new revenue model of some size and scope.
There are huge new uncertainties. Despite the obstacles, the original plan had the advantage of a clearly-defined source of revenue, primarily based on per-transaction fees. Now Isis has to search for both a sustainable role and viable revenue streams to match.
It still is possible that Visa and MasterCard might agree to share some part of transaction revenue with Isis, in exchange for support Isis might provide, but that remains to be seen. It also remains to be seen how significant a revenue stream that could provide.
The change also throws into question the future roles for original partners Barclays Bank and Discover Financial Services. Under the original plan, which would have required Isis to create its own functional equivalent of the branded credit or debit card, Barclays would have been an obvious brand to use. Likewise, Discover Financial would have provided the payments clearinghouse functions.
Under the new plan, it isn't clear what role Barclays or Discover Financial might play. The Wall Street Journal reports that Isis concluded that creating a new branded payment network would take too long, given the level of competition in the market. The Journal also reports that retailers were not keen on adding yet one more provider.
The shift means an end to the "clash of giants" theme that had AT&T and Verizon challenging Visa and MasterCard directly as a payment processor. What new "story" might emerge remains unclear, for the moment, as Isis now will embark on a search for a new narrative.
Some will note that the shift in strategy solves one problem, but creates others. Isis no longer has to spend the time and capital to create a new retail payments brand, a prospect many had pointed out would be time-consuming and expensive. But the new model also must define and then create a viable new revenue model of some size and scope.
There are huge new uncertainties. Despite the obstacles, the original plan had the advantage of a clearly-defined source of revenue, primarily based on per-transaction fees. Now Isis has to search for both a sustainable role and viable revenue streams to match.
It still is possible that Visa and MasterCard might agree to share some part of transaction revenue with Isis, in exchange for support Isis might provide, but that remains to be seen. It also remains to be seen how significant a revenue stream that could provide.
The change also throws into question the future roles for original partners Barclays Bank and Discover Financial Services. Under the original plan, which would have required Isis to create its own functional equivalent of the branded credit or debit card, Barclays would have been an obvious brand to use. Likewise, Discover Financial would have provided the payments clearinghouse functions.
Under the new plan, it isn't clear what role Barclays or Discover Financial might play. The Wall Street Journal reports that Isis concluded that creating a new branded payment network would take too long, given the level of competition in the market. The Journal also reports that retailers were not keen on adding yet one more provider.
Perhaps intriguingly, the shift of Isis strategy means other players in the ecosystem, especially the many smaller providers plumbing some specific roles within the broader "payments" ecosystem, gain attention.
If Isis has to look for new roles and revenue streams, the many smaller providers of various solutions will become more valuable, at least potentially, if they can provide distinct features and revenue streams, either for the actual payments function, the venues where payment is required or helpful, or in related businesses related in some logical way to people shopping.
Isis isn't planning to launch its first payments trial until 2012, as a provider of mobile payment for transit services in Salt Lake City. What isn't so clear now is how relevant that experiment will be for Isis, long term. It still remains possible that Isis will get some small share of transaction revenue, but some will argue that never will be enough to justify Isis as a business proposition.
Lots of thinking now likely is going into ways mobile data and back office capabilities, such as billing, location and other details about devices, operating systems and so forth might be exposed to third parties. But that sort of thinking has been going on for years, and is not new.
Perhaps a key challenge for Isis now is to avoid exchanging one set of difficult competitors with another set of equally-talented competitors. And Isis will face plenty of those.
If Isis has to look for new roles and revenue streams, the many smaller providers of various solutions will become more valuable, at least potentially, if they can provide distinct features and revenue streams, either for the actual payments function, the venues where payment is required or helpful, or in related businesses related in some logical way to people shopping.
Isis isn't planning to launch its first payments trial until 2012, as a provider of mobile payment for transit services in Salt Lake City. What isn't so clear now is how relevant that experiment will be for Isis, long term. It still remains possible that Isis will get some small share of transaction revenue, but some will argue that never will be enough to justify Isis as a business proposition.
Lots of thinking now likely is going into ways mobile data and back office capabilities, such as billing, location and other details about devices, operating systems and so forth might be exposed to third parties. But that sort of thinking has been going on for years, and is not new.
Perhaps a key challenge for Isis now is to avoid exchanging one set of difficult competitors with another set of equally-talented competitors. And Isis will face plenty of those.
