Five years from now, when you wave your paper-thin phone-like communication device in front of some futuristic POS terminal at your local artisanal mayonnaise shop in order to pay for two jars of the good stuff, there will be an incredible number of interested parties involved in that transaction. You and your mayonnaise-monger might think that just the two of you are involved — and isn’t that a nice thought? — but your card issuer, your bank, the payments processor, and now, your mobile carrier (presumably at that point, AT&TMobileRizonSprintCorp) are all there with you. And just as interchange helps spread the costs of a massive payments infrastructure across all parties that pay to support it, your mobile wallet will add another layer of expensive technology to the payments ecosystem. Someone has to pay for it — will it be your carrier? your issuer? god forbid, you? It’s an important question, considering that who pays for it determines how much privacy you can expect to keep.

NFC Times reports that ISIS, the mobile wallet project supported by AT&T, T-Mobile and Verizon, would prefer to have its partner card issuers — banks and credit card companies — pay about $5 per account per year to have their cards hosted virtually on ISIS users’ phones. “In effect,” writes NFC Times, “the banks or credit card companies are renting space in secure elements created on the SIMs [cards]. The fees include the secure platform to deliver and manage the applications, as well.” Issuers would be charged extra fees for other “events, such as canceling an application on lost or stolen phones.”

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But according to the report, issuers are not crazy about spending that kind of money on customer accounts, just to put their cards on a phone. “It’s really not a replacement, it’s an addition. We still have to issue plastic cards,” an issuer told the NFC Times. And $5 per customer per year is a bit high considering issuers also pay money to issue cards (and collect interchange and interest payments on them, it should be noted). NFC Times’ source feels that ISIS is trying to monetize too aggressively, too soon, potentially at the expense of letting the new ecosystem grow.

Google Wallet, by contrast, is charging its only issuing bank, Citi, nothing to host its “cards” on the web giant’s mobile payments application. Google plans to make money by mining customer data and selling local ads and coupons through the wallet application.

Google is very, very good at selling targeted ads in a way that ISIS’ mobile carrier parents could likely never be. The troika of carriers don’t have Google’s treasured data nor the algorithms that parse the data, both of which make Google so adept at targeting ads. And targeting ads at mobile wallet users, as we’ve discussed, is the reason why a.) many marketers hope mobile wallets are the future of payments and b.) what makes them so potentially terrifying. Just walking down the street or driving by a strip mall does not necessarily mean that you are looking to spend money at a mediocre Thai restaurant, but don’t tell marketers that — allowing that mediocre Thai restaurant to blast you with a coupon while you’re nearby is the future of commerce and advertising.

For Google, the product is free for both users and issuers, and the revenue — if there is any to be had — will come solely from this form of invasive advertising. For ISIS, this sort of advertising won’t be as necessary to its revenue, so long as it can convince issuers to play ball, which, according to the NFC Times, might be a hurdle. Presumably, if ISIS cannot get this stream of revenue from its card issuing partners, it would have to rely more heavily on selling advertisements.

So again, we’re back to the old Silicon Valley mantra: if the product is free, you’re the product. And like so many free products that the tech world gives us, mobile wallets are another that we don’t really need. Card issuers’ reluctance to pay just $5 a year should be a clear indication that they do not have much faith in mobile wallets’ ability to change commerce in any real fashion — i.e., they likely do not believe that there will be enough new spending in this channel to warrant the cost. To them it’s not a replacement, but just another channel. Why? Because paying for goods and services electronically already involves an incredibly complex and sophisticated ecosystem of services and parties that do not necessarily need this added layer of mobile functionality and marketing opportunities to continue to do its job properly.

The advertising revenue is of no interest to you, your bank, or anyone other than Google (and maybe ISIS.) It will be, basically, a parasite on the whole payments ecosystem, which we will have welcomed just to avoid swiping a physical card. Is that really worth it?

Willy Staley

Willy Staley is a staff writer and columnist for His columns focus on banking, monetary policy and culture.