America's Unbanked

November 21, 2010

The three leading mobile carriers in the U.S. - AT&T Mobility, T-Mobile USA and Verizon Wireless - last week officially announced a joint venture tasked with building a nationwide network to support the use of mobile phone-based payments at the point of purchase. The network, dubbed ISIS, "aims to fundamentally transform how people shop, pay and save," the announcement said.

ISIS is the latest attempt at creating mobile alternatives to traditional payment instruments - like credit and debit cards - that are controlled by the banking system. It will rely on smartphone and near-field communications technologies. And ISIS is working with Discover, a payments network that supports credit and debit card acceptance at about 7 million merchant locations, to build the network infrastructure.

"Our mobile commerce network, through relationships with merchants, will provide an enhanced, more convenient, more personalized shopping experience for consumers," said Michael Abbott, a former GE Capital exec who has been tapped to lead ISIS. And payments is only the start of things to come from this venture. "We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, rewards cards, coupons, tickets and transit passes," Abbott added.

Collectively, the founding partners of ISIS provide wireless services to 200 million consumers who should be able to begin using their mobiles as payment devices within the next 18 months, the partners said.

Barclaycard US, a unit of the British bank Barclays PLC, is expected to be the first issuer on the network, offering multiple payment products tied to customers' mobile communications devices.

Abbott said he's confident the venture offers "the scope and scale necessary to introduce mobile commerce on a broad basis." And it won't just be limited to Discover and Barclays, he said, adding that eventually "ISIS will be available to all interested merchants, banks and mobile carriers."

It seems a good way to kick-start mobile payments, but ISIS isn't something that's being created with the unbanked in mind.

PayNearMe, 7-Eleven & Cash

Enter PayNearMe, a new cash payment network and technology platform that builds on a modified cash load network to support a wide range of retail transactions for consumers who don't possess credit/debit/prepaid cards, or those who simply prefer using cash.

Depending on which estimates you turn to, cash remains a top payment choice for at least a quarter of the U.S. population.

PayNearMe was designed to help online retailers to tap into this market, but the creators say it can be used for assorted payments, from loan repayments, paying for telephone orders, purchasing money orders, even loading funds onto electronic wallets. (Electronic wallets resemble traditional bank cards, but  include micro-processing chips that can store information concerning multiple financial accounts.)

Amazon, Facebook and Progreso Financierio, a community development financial institution (CDFI) focused on lending in Hispanic markets, are among the first to offer PayNearMe. The convenience store chain 7-Eleven, with 6,000 U.S. locations nationwide, has signed on as cash handler - accepting cash, printing receipts and completing PayNearMe transactions at store registers in real time.

"We want 7-Eleven to be the neighborhood destination for people who prefer or need to pay in cash and to provide all consumers with the same shopping choices no matter how they choose to pay for goods and services," says Jesus Degado-Jenkins, senior vice president for merchandizing and logistics at the C-store chain.

Last week, PayNearMe announced customers also will be able get special PayNearMe cards, free at 7-Eleven outlets, that support mobile payments. "Turning the prepaid model on its head" is the way the creators describe this newest PayNearMe enhancement.

PayNearMe also announced last week that it had secured $16 million in funding, and that it has earmarked at least some of that money to build out its mobile payment option. Provided the mobile solution isn't limited to smart phones, PayNearMe may have hit on something that could have real appeal among the unbanked and underserved Americans.

One in four people, worldwide, survive on less than $1.25 a day