Mercator Blog

Why Mobile Payments Are in an Awkward Position
Date: November 15, 2013
Research Team
Isis on Thursday finally announced that the company was embarking on a national rollout of its mobile wallet. I say “finally” because the joint venture formed about three years ago in Q4 2010.

Mobile payment products like Isis that feature network-branded payment products (Visa, MasterCard, American Express, or Discover) often highlight their broad usability compared to mobile wallets sponsored by retailers like Starbucks and Dunkin Donuts. Focusing on universal acceptance might yet prove to be the more successful strategy, but it has put Isis in a somewhat awkward position.

The payments industry and the press have clung to the idea that mobile wallets should enable consumers to leave their “real” wallets at home. In some cases, specific products have even promoted this theme. The image below, taken from a blog titled “Use Your Smartphone as Your Wallet” posted on a Verizon Wireless webpage, is just one example.


The problem lies not in the message but in execution. Currently about 1 million merchant lcoations are equipped to accept Isis payments. One million is a significant footprint but certainly does not deliver the same degree of acceptance as any of the inidividual card products that the application supports. In that sense, adding a bankcard to Isis greatly reduces the product’s utility.

It’s not unreasonable to expect consumers to download mobile payment apps from a few of their favorite retailers. This is consistent with the way the market for private-label cards has developed. But mobile wallets with only moderate or “not quite universal” acceptance are bound to frustrate consumers at checkout. Today, cashiers frequently respond to contactless payments with a quizzical look, even at retailers that have appropriate point-of-sale hardware. Such issues will certainly limit adoption. Isis could be stuck in the awkward position between “broad” acceptance and “not broad enough” for as long as merchants delay installing contactless terminals. To ride out this period, Isis will likely have to rely on consumer incentives from merchants and issuers to keep users active.

Indeed, the rollout is just beginning. Time will tell if the current awkwardness is permanent or just a passing phase.

Follow Michael Misasi on Twitter @mikemisasi.