Why the Future of Mobile Payments Looks More Like OpenTable than ISIS

Yesterday the Wall Street Journal reported that carrier-backed and NFC-based mobile payments venture ISIS would begin rolling out nationally:

The nearly three-year-old venture, known as Isis, plans to announce Wednesday that it will launch the payment service nationwide later this year after nine months of testing . . . 

Isis said that the pilot tests' findings will be incorporated into the latest version of the system. Among other things, the test showed that active users tapped their phones for payment more than 10 times a month. Two-thirds of active users chose to receive offers and messages from specific brands, according to the test results.

While mobile payments will eventually be widespread -- different global markets are seeing varying rates of development and adoption -- the near-term future of mobile payments in the US looks less like ISIS and much more like OpenTable's new (vertical) payments offering.

The NY Times yesterday reported that the restaurant reservations app will soon incorporate no-frills mobile payments:

The payment process, still in testing, will be straightforward, Matthew Roberts, chief executive of OpenTable, said in an interview. At the end of a meal, the diner would open the OpenTable app and pay the check with the tap of a button. The diner can review the check, adjust the tip and finish the payment.

“There’s no scanning, there’s no bar codes, there’s no geeky stuff,” Mr. Roberts said. He said that OpenTable would not take a cut of each transaction if a diner paid with the app. The restaurant would be charged the typical interchange fee for a credit card transaction. The simple transactions through the app are another way to attract people to use OpenTable, which charges restaurants for reservations made through the service as well as a monthly service charge for using its equipment.

In individual store and specific vertical contexts mobile payments are starting to take hold in the US. That's because consumers see concrete value or convenience in using mobile apps to pay (parking is my favorite example). Arguably the most successful example of mobile payments in the US to date is the Starbucks app.

As a general matter, however, credit cards remain very easy to use and there's no common standard or experience available across merchants. Most US consumers don't see a justification for mobile payments in the abstract. But "in the moment" or in very specific situations consumers can recognize their value. 

The transition to NFC-based payments will probably still take years in the US market -- unless the next iPhone enables them (ISIS wants to expand to iOS). But there's a significant, immediate opportunity for vertical apps like OpenTable to cultivate consumer mobile payments usage. Mobile payments through the OpenTable app also may create more loyalty and frequency vs. competitors such as Yelp or TripAdvisor.

I believe that these very concrete use cases will help train consumers to trust and adopt mobile wallets/payments, which will eventually pave the way for services such as ISIS or Google Wallet. However it will be 3 - 5 years before there's strong, national consumer usage (and merchant adoption) of these "horizontal" payments offerings. 

By contrast people will be using OpenTable payments as soon as OpenTable flips the switch.