The mobile payment consortium ISIS has signed initial merchants and says the company is focusing on the quick service retailer (QSR’s) market. Isis is looking at adding capabilities to handle private-label retail cards and gift cards. Jim Stapleton, head of sales and account management at Isis, made these remarks during his keynote Wednesday’s at the Smart Card Alliance’s 2011 Mobile and Transit Payments Summit in Salt Lake City.

Isis is a joint venture of mobile carriers AT&T Mobility, Verizon Wireless, and T-Mobile USA. Transactions will flow on Discover Financial Services payment network and Barclaycard, the U.S. credit card unit of London-based Barclays Bank plc, will initially offer consumers Isis accounts. See my earlier thoughts on ISIS: The ISIS Mobile Wallet: Are Visa, MasterCard and PayPal Under Siege?

What we think:

A focus on QSR’s is a wise move for ISIS. Despite much of the hype around mobile payments, and in particular around NFC, sexiness and convenience, not technology, is what’s needed to get this market off the ground.

Case in point is what Starbucks is doing in its own retail stores. Starbucks recently reported one million transactions via its mobile payment application in just fewer than 30 days. For reference see: One Percent of Starbucks Transactions Now Mobile. While the Starbuck application is very primitive (it displays a barcode on a your handset which is scanned) its newness has some sex appeal, and its cool. And if the early momentum is any indication, consumers seem to appreciate speedier check-out (50% faster than cash) and the elimination of the need to dig for debit/credit card or cash. We think that the early success of Starbucks is a positive indicator for ISIS at QSR’s – if you build it they will come. But ISIS must do more.

ISIS must navigate two hurdles: QSR sales are a commodity game. Profits are all about volume. The challenge is how do you make a $10 transaction attractive to everyone from an economic standpoint. PayPal and others have already adjusted their rates for low value payments. ISIS fee structure remains elusive. The second is getting consumers to use the solution. Contactless plastics, which also targeted QSR’s has not seen wide adoption, largely we think, because the majority of consumers don’t even realize the card they are carrying has the capability. Unlike contactless plastic, which is “pushed” to consumers, mobile payment solutions are more likely to require consumers to opt-in. The Starbucks momentum may indicate that when a consumer opts-in by downloading a mobile payment application, they are more likely to use the application capability at the retail point of sale. That may be good news for ISIS.

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• NFC in 2011: Sprint Prepares to Take on Isis (readwriteweb.com)