The New Definition of "Issuer"
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22 November 2010
As Celent's analyst covering the mobile banking & payments sector, I would be remiss to not make at least some mention of last week's announcement by Isis, the mobile payments JV launched by AT&T, T-Mobile & Verizon. One of the more striking aspects of the Isis announcement was that Barclay's was characterized as the "first issuer", implying that many issuers are on the way. For most professionals in the banking industry, the term "issuer" would evoke thoughts of payment card-issuing FIs. While bankers may define issuers as such, Isis is almost certainly going to use a different definition. Specifically, Isis is likely to include retailers (e.g., McDonald's, Wal-Mart, Starbucks, Shell, etc.) with prepaid card programs in its vision of issuers. The benefits of an Isis-like solution to such retailers are fairly obvious -- the ability to make no-interchange, float-bearing prepaid card programs even more attractive to consumers, with mobile-enhanced loyalty, reward, convenience & re-load options. In sum, a no brainer for retailers. Real examples overseas show us that prepaid cards can be a formidable force in the mobile contactless payments space. In the Japanese market, retailers and other non-FIs (Suica, Nanaco, Edy) with prepaid products hold the overwhelming share of mobile contactless payment activity. With T-Money, Korea is the same -- a market dominated by prepaid mobile contactless cards. In this context, what's good for mobile contactless payments isn't necessarily good for banks. In the Japanese & Korea markets, banks' roles have been relegated to prepaid reloads, done via low-margin ACH-like funds transfers. We're now beginning to get a little taste of this model back home -- just last week, it was announced that Starbucks' mobile prepaid cards can now be reloaded via PayPal, with ACH-based bank transfers as a potential funds source. All of this just goes to show that it's already evident that mobile contactless payments are not the reserved domain of banks -- the pre-millenial definition of issuers.