T-Mobile, Verizon Wireless and AT&T have joined forces to form Isis, a partnership that aims to enable mobile payments on the three networks in the US. With current issues of who will control the business niche to security concerns, Juniper Research has estimated that $127 billion worth of mobile transactions will be processed by the end of 2014. This partnership does have challenges to working with financial institutions and retailers to make this work.

In 2008, GSMA instructed manufacturers to incorporate Near Field Communication (NFC) chips into their phones by 2009′s year end, a short-ranged wireless technology that uses radio waves. Generating unique authentication codes for individual transactions, NFC requires a 2-4 cm range with the reader, and the radio transmitter automatically shuts off after 8 seconds. There is, however, problems with the implementation of NFC as the handset makers lag in producing phones with NFC chips and retailers find no burning need to require installations of expensive mobile payment readers. It does look like manufacturers will support this by the end of 2011.

Instead of waiting two more years before there is enough coverage of NFC phones, Visa has envisioned a different route that makes use of the available smart phones in the form of a microSD card. The PayWave, as it is called, works in a similar manner with NFC chips. Working with its PayWave application, aside from similar NFC abilities, monitors real time anomalies in the account’s activities then tracks and compares it to the account history. Losing it is no problem as the microSD card does not store any account information. However a possible Trojan horse might be able to exploit the microSD.

There are companies working on solutions related to security. With a myriad of mobile fraud prevention products helmed by ClairMail, it services 8 of the top 12 banks in the US. They allow their customers real time transaction monitoring and alerts based on pre-set conditions. Others like ValidSoft, who partnered with Visa Europe in December 2010, determine if the transaction is at the same location as the customer’s mobile phone. Despite Microsoft’s findings that privacy is a big concern, such location-based services as these allow both banks and users to instantly notice frauds, like account activity in home stores when you are on vacation.

Isis is already collaborating with financial institutions like Visa and Mastercard to determine their roles in the system of mobile payments, as power-grabbing is ensuing between the mobile carriers, credit card companies, and banking intermediaries in a business that has big potential. With Apple and Google reportedly creating their own mobile payment systems, Android code-naming theirs “Cream”, Deutsche Telekom’s CTO says that “everybody is still experimenting”, and that the one in control will be determined by 2012.

For consumers, the coming mobile payment system is still evolving and should start to take shape in the US by the end of 2011. Between now and then, there will be a lot of activities going on.

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