Isis has had a slew of announcements – about an impending national rollout and further assertion by both Amex and Chase of their intent to continue their partnership. Surprisingly (or not) Capital One has stayed mum about its plans, and neither has Barclays or Discover shown any interest. And much ink has been spilled at how resolute (and isolationist) Isis has been – including here on this blog. So does the launch reflect a maturity in the JV to tackle a national rollout, or is it being forced to show its hands? Wait..I have more questions...
What about the missing partner?
I have no reason to believe that CapitalOne will continue its relationship with Isis – as I doubt they learnt anything new from the Isis pilot – apart from the excruciatingly difficult orchestration required to balance multiple TSMs, Carriers, Handsets and the Secure Element. Further, there are no new FI launch partners – no BofA, no WellsFargo, no Citi – who each are capable of paying the upfront cost to be on Isis. But, even to those who can afford it – the requisite capital and operating expenditures stemming from a national rollout, should give pause when compared against the lift Isis can provide to incremental revenue via Isis wallet consumers. This is the biggest qualm for Issuers today – that Isis has all the capability to drive distribution and do secure provisioning – but none of the capacity to drive incremental card revenue. And Isis opting to profit from simply delivering merchant offers based on store proximity, with no visibility in to past payment behavior and no transactional marketing capabilities – is hardly different or better than what FourSquare already does for Amex, for example. So why bother?
*Updated* There is also a total misalignment of objectives between Isis and its Issuing partners around customer acquisition. Isis charges for provisioning credentials to the wallet regardless of how many transactions that may follow. So Isis has an incentive to push its wallet to everyone with a phone even if that person never completes a contactless transaction. Where as its Issuers have an incentive to get most bang for the buck by targeting the folks most likely to use a smartphone to pay after activation. See a problem? *End Update*
How much more runway does Isis have?
This is the question that has been around most. How much more capital is Isis’s parents willing to plow in to the JV before they come calling? The rumored quarter a billion pot holds enough to power a national rollout, but is it enough to sustain that momentum post-launch? If those $100 Amazon Gift cards they were handing out in Austin/SLC to boost consumer adoption (a final push just prior to reporting overall usage numbers) were any indication, Isis needs to invest in a smarter go-to-market strategy. It wouldn’t be surprising if Isis had to go back to its parents for mo’ money so that it can continue to run – while standing absolutely still.
Who has a recognizable brand – Isis or Amex/Chase?
Isis once boasted about buying a billion impressions in their pilot markets across various marketing channels. I shudder to see the ROI on that ad spend – especially when all the Ads in the world could not help if a customer still had to get a new phone, or get a new SIM by visiting the carrier store – to do what a plastic card can do effortlessly. It’s FI partners (Chase, Amex and CapitalOne) have so far kept any Isis branding outside of their ads, and I doubt if that would change. After all, why would Amex and Chase who collectively spent about $4.2B in advertising last year care about giving Isis any visibility, when a Chase or an Amex customer still has to fire up an Isis app to use a Chase or an Amex card? Why would Amex and Chase dilute its brand by including Isis messaging – when they themselves are pitted against each other inside the wallet? For some inexplicable reason – Isis made a conscious decision to become a consumer brand instead of a white label identity, provisioning and payment platform. (And for all of the faults attributable to Google – they are a consumer brand and yet – look at all the trouble it had to make its payments efforts scale.) I believe that until Isis displays a willingness to let its Issuing partners play front and center, any support they in turn provide to Isis is bound to be non-committal.
Have you counted the Point-of-Sale registers?
MCX proved to be the sand in mobile payments gears since the announcement. It has had “quite the intended” effect of killing any kind of forward movement on in-store payment initiatives that required a conventional point-of-sale upgrade. Contactless upgrades at point-of-sale which have long been tied to the EMV roadmap has had a series of setbacks, not the least of which is the continuing ambiguity around Issuer readiness, merchant apathy, and roadblocks such as the recent ruling. More so, the ruling injected more ambiguity in to how proximity payments would function, which payment apps must be supported for the same debit or credit transaction etc.
With retailers, Isis brings nothing new that others are unable to claim, and infact it brings even less – as there is no new context outside of store-customer-proximity that it can bring to deliver discounts and coupons to customer prospects. And it’s cringeworthy when someone claims to “help” retailers in driving incremental traffic to stores, simply because they are able to pair context and proximity among other factors. These claims are hugely suspect due to how limited their “contexts” are – and no one can blend intent, past behavior, location and other factors better than Google – and even they churned out an inferior product called Google Offers. Transactional data is uniquely valuable – but Banks have been negligent in their role to do anything meaningful. But I digress.
Coming full circle:
Will we ever see proximity payments realized in a way that does not include the SE? The UICC based Secure Element model has been the favored approach by Carriers, which allows device portability and to exert control on the proximity payments ecosystem. We have seen deviations from the norm – in the form of Bankinter, and the recent RBC/BellID Secure cloud – which reject the notion of an onboard Secure Element, and opts to replace it with credentials on TEE, in memory or on the cloud. There is much interest around this topic, but predicting which way this will turn out is difficult owing to where the power to effect change resides – in the hands of OEMs, Ecosystem owners, Carriers etc. And don’t forget that Networks need to subscribe to this notion of credentials outside of SE, as well.
But what about an Isis wallet that decouples itself from NFC/SE? Google has toyed with such an approach, but it clearly has the assets (Gmail, Android et al) to build itself a long runway. What about an Isis that exists outside of NFC/SE? Well – why do you need Isis then? To be fair, such an approach would pale against MCX or Paydiant or a number of other wallets and offer even less reasons for merchants to adopt. Paydiant offers both a better point-of-sale integration and a quicker QR capture – which Isis will struggle to match. It’s abundantly clear – take away the SE – and just as easily, the Carrier value proposition collapses on its own like a pack of cards. That’s one risky bet.
What are your thoughts about the future of Isis?
This is a re-post from Cherian's original blog post "Isis: A JV at odds."