When Isis, the mobile wallet joint venture of Verizon, AT&T, and T-Mobile, was formed in 2010, Sprint looked like the odd man out. Now it's starting to look like the one that was smartest with its (mobile) money. (See: US Carriers Combine Mobile Wallets.)
Sprint Corp. (NYSE: S) recognized early on that it wouldn't dominate the mobile payments space, at least not on its own. It wasn't left out of Isis , according to Kevin McGinnis, vice president of Sprint's Pinsight Media+. Rather, it was one of the carrier catalysts for the formation of the joint venture. He told us it just decided to bow out once Isis turned into an opportunity to affect interchange and become a competitor to Visa and MasterCard. (See: Mobile Money: What's the End Game? and US Wireless Operators Spend Big on mCommerce.)
"If you believe you can take a smaller slice of a larger pie, that will equate to bigger returns and more revenue than trying to control the pie and take a greater part of the pie," he said, referring to the payments space, not the Thanksgiving dessert. "We think you can exponentially participate if you partner and take less."
McGinnis called Isis a "tedious and risky approach to the market." Sprint made the decision three years ago to focus on being the connectivity provider and partner with Google (Nasdaq: GOOG) to promote Google Wallet. (See: Google Taps Sprint for Tap-to-Pay and Sprint Stakes Its mCommerce Claim.)
Interestingly, Verizon Wireless infamously blocked Google Wallet on its network, claiming it was insecure when it was launched. so Sprint has essentially been Google's exclusive operator partner. (See: Verizon Ready to Flash Isis Mobile Wallet and Verizon Blocking Google Wallet? Poor Decision.)
McGinnis said Sprint has gotten three key takeaways from the 18 months it has offered Google Wallet:
- Payments will be an ecosystem play. "It's obvious, but you feel it on a day-to-day business with implementation."
- Go to the app, instead of making it come to you. Sprint recently launched Pinsight Touch to embed Near Field Communications (NFC) contactless payments in other apps, rather than just offering it as part of Sprint Wallet. (See: Sprint Plays by Its Own Rules, Too.)
- Plastic isn't broken. Mobile payments aren't actually needed per se, so customers have to be educated about the value beyond just tap-to-pay. The exception might be in the prepaid space. Sprint's Boost Mobile just launched a branded wallet, because its customers are cash driven and contract free. So there is a clearer value proposition for them in mobile banking. Sprint will follow that up with a Virgin Mobile USA Inc. (NYSE: VM) wallet.
"I think payments are the bright shiny object of NFC, and if we're not careful, it'll lessen the impact of NFC in the marketplace," McGinnis said. "It's not the use case that will draw the most usage. It's about prompted discovery by touching your phone to something and content transfer."
McGinnis commends Samsung Corp. on getting this part of the equation right. He's seen a lot of traction from the access community using the phone for secure access to doors, machines, and computers. "Once consumers understand the concept of touching your device to something to unlock a capability, then payments make more sense."
Sprint is placing most of its bets on NFC as the connectivity of choice, but McGinnis said no single technology or app will win the day. In fact, the company could still join Isis now that it has relaxed its requirements and opened up a bit. The conversations are ongoing, but they would involve "enabling" Isis, not joining it, by letting Isis put its wallet on Sprint phones. He doesn't expect Isis to welcome any Sprint apps or competing wallets on its handsets anytime soon. (See: NFC to Come Standard in Sprint LTE Phones.)
"If you try to control all of this, you all of the sudden get people who should be partners fragmented in a competitive way," he said. "As an industry, carriers have to be careful because OTT players don't see it that way. They are not fragmented on a network-centric consumer basis… For us, partnering is the best strategy."
— Sarah Reedy, Senior Editor, Light Reading