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Reports: Capital One pulls out of Isis mobile wallet platform

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Capital One is ending its support for Isis, the Near Field Communications-based mobile commerce network spearheaded by Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and T-Mobile US (NYSE:TMUS).

Isis kicked off mobile wallet trials in late 2012 in partnership with Capital One and rival payment services firms Chase and Barclaycard. This summer, Isis announced plans to extend its services nationwide following consumer pilots in the Austin, Texas and Salt Lake City markets, also expanding beyond Google's (NASDAQ:GOOG) Android to support Apple's (NASDAQ:AAPL) iOS, Microsoft's (NASDAQ:MSFT) Windows Phone and BlackBerry (NASDAQ:BBRY). But in an email sent to consumers, Capital One said it is pulling out of the program.

"Our pilot test with Isis will be coming to an end soon," a Capital One spokesperson told NFC World. "We have gained valuable insights from our customers who were among the first to pay with the Isis Mobile Wallet. We continue to engage with Isis on the future of mobile payments."

Capital One's decision underlines the challenges facing Isis as its platform launches nationwide. Isis faces stiff competition from rivals like PayPal and Merchant Customer Exchange, the forthcoming m-commerce network led by retailers including Walmart, Target, Best Buy and 7-Eleven; moreover, Isis also must combat retailer resistance to NFC point-of-sale technology. Another challenger, Google Wallet, announced Tuesday it will drop its requirement that compatible devices must contain a NFC chip with a secure element.

"Capital One dropping its support for Isis is significant in what it telegraphs about the problems issuers will continue to face with the wallet provider," Yankee Group analyst Jordan McKee told Mobile Commerce Daily. "Issuers must pay each time a consumer loads their card onto the wallet. The caveat is that whether or not a consumer uses the card, the issuer must pay to have it in the Isis Wallet. Card issuers are interested in encouraging card spend whereas Isis is purely interested in getting consumers to link their cards to the wallet. This conflict of interest will continue to be problematic."

But Aite Group senior analyst Rick Oglesby believes that the gains made by companies like PayPal and Apple, which is integrating new user security safeguards and iTunes purchase capabilities into its new iPhone 5s, could benefit Isis moving forward.

"Many financial institutions and merchant acquirers see PayPal and Apple as threats and the moves that these companies are making could cause financial institutions, payment networks and acquirers to accelerate their mobile payments efforts in response to the perceived threat," Oglesby said. "Since Isis is looking to partner with the financial institutions, payment networks and acquirers, the moves made by Apple and PayPal could drive partners into Isis' embrace."

For more:
- read this NFC World article
- read this Mobile Commerce Daily article

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