Using your smartphone to pay for stuff

AT&T, Verizon Wireless, T-Mobile team up to create mobile commerce network

Three major U.S. mobile phone carriers are building a commerce network that will allow their subscribers to pay for their in-store retail purchases by swiping their devices into a scanner to provide the necessary information to complete the transaction.

AT&T, Verizon Wireless and T-Mobile USA on Tuesday announced the creation of the Isis mobile commerce network. They make a bold promise:

The Isis mobile wallet will eliminate the need to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes, fundamentally changing how you shop, pay and save. All with your phone.

In other words, if you thought you were dependent on your smartphone before, you haven't seen anything yet.

The service is expected to roll out in selected markets over the next 18 months and will be open to any retailers, banks and mobile carriers. It's based on open standards and will utilize something called near-field communication (NFC) technology.

While it may be awhile before Isis is available nationwide, the fact that the three carriers involved collectively have more than 220 million subscribers virtually guarantees a broad customer base. The joint venture is working with Discover Financial Services to build a mobile payment infrastructure, while Barclaycard US will issue credit accounts through Isis.

“We believe the venture will have the scope and scale necessary to introduce mobile commerce on a broad basis," Isis CEO Michael Abbott, a veteran of GE Capital, said in a statement.

NFC uses short-range, high-frequency wireless technology that allows the encrypted exchange of information between devices in close proximity. So unlike credit or debit cards, the smartphone wouldn't have to touch the scanner. It's worth noting, by the way, that retailers would have to purchase NFC scanners to offer the payment service to customers. This could mean that only large retailers initially will offer Isis, even in areas that already are part of the network.

Also, consumers will need a smartphone that supports NFC. Over time, of course, they all will. In the short-term, Google says the next version of its Android mobile OS will include support for NFC, while Nokia anticipates offering NFC support in many of its Symbian-powered smartphones next year.

Now for the "we'll see" assurances. The companies say the "new system is being designed and built to include strong security and privacy safeguards." We'll see.

Abbott, however, says not to worry. From IDG:

Asked about security of NFC, Abbott said it's "inherently" easier to secure private data on a phone than on a credit card. "It's locked down with a password and the number is encrypted inside the phone," he said. "It's not sitting out in raised numbers on a piece of plastic. Even beyond that, one call shuts [the Isis service] all down, and one call can restore it."

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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