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How to invest in ISIS

Online mobile shopping could command as much as 12 percent of total global e-commerce by 2015, according to a report ABI Research. It’s a sign of just how comfortable consumers are getting using their phones to make purchases. The next logical step is to use mobile phones as payment mechanisms in stores, restaurants and small businesses – doing away with plastic once and for all.

The transition from credit cards to phone swiping could completely change the way with interact with businesses. No longer would we use a simple plastic card with a magnetic strip on the back, we’d be paying with a computer that could track purchases, offer discounts, tick off rewards points and offer incentives to come back.

ISIS is leading the charge into the pay-by-phone marketplace through a partnership with AT&T, Inc. (NYSE:ATT), Verizon Communications Inc. (NYSE:VZ) and T-Mobile USA. The national mobile commerce network will use near-field communication (NFC) technology to allow phones to wirelessly communicate with checkout terminals.

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies. Here are some tickers to consider if you’d like to invest in ISIS and NFC:

Discover Financial Services (NYSE:DFS). Payments made through the ISIS network will be processed by Discover. The Discover network is currently accepted at more than seven million merchant locations nationwide. DFS will, no doubt, get a percentage of all the sales the company processes.

Barclays, PLC (NYSE:BCS) Barclaycard US is expected to be the first issuer on the ISIS network thanks to the company’s experience processing NFC payments using standard credit cards. Eventually the ISIS network will be expanded to other banks.

While it’s unclear exactly how AT&T, Verizon and T-Mobile will profit off ISIS, I suspect they’ll also receive a cut of the payments processed over the network. They’ll likely ramp up efforts to partner with retailers to offer expanded services, too – things like rewards points, customer tracking and coupons.

It’s important to remember, though, that ISIS is just one of the many networks and companies working to dominate the pay-by-phone market. Visa, Inc. (NYSE:V), MasterCard, Inc. (NYSE:MA), eBay Inc.’s PayPal (NASDAQ:EBAY), Google Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are just a few of the heavyweights with skin in the game. It’ll be interesting to see which companies come out on top.

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NFC: The next trillion dollar industry (AAPL)

Just when you started to think that Apple Inc. (NASDAQ:AAPL) couldn’t possibly come up with another multi-billion dollar money-making venture, rumors have started trickling in that the iPhone 5 and iPad 2 will contain near field communication systems.

This “wave and pay” technology, dubbed NFC for near field communication, will allow you to swipe your phone like a credit card at Macy’s or the local gas station. And it will all rely on a small chip that can exchange data with a checkout terminal when the terminal’s within four inches of your phone. If Apple adopts the technology, it should have an inherent advantage over competitors thanks to the fact that most iPhone and iPad users have already linked their devices with a credit card or bank account via iTunes.

The biggest hurdle to adoption? Ensuring that retailers support NFC. According to Reuters, Apple is considering deeply subsidizing the terminals, or giving them away for free to encourage nationwide adoption of the technology.

With Americans charging more than $1.8 trillion a year on credit cards, the move could be yet another game-changer for Apple and the credit card industry in general. Indeed, an army of startups have been working on ways to make purchases easier and more rewarding for smartphone-wielding customers.

I wrote recently about the Bay-area startup Bling Nation, which has partnered with PayPal to test a RFID sticker that users could affix to their phones and use to make charges. Other companies are experimenting with key fobs, loyalty cards and NFC-enabled SIM cards.

The stakes are enormous as businesses start chipping away at the 2 percent+ cut credit card companies have been siphoning off purchases for decades. The progression from plastic to mobile makes perfect sense, though. Mobile phones are centralizing all of our tasks in one device. They’ve replaced watches, calculators, MP3 players, notepads, day planners and phone books. And that leaves just two more things in our pockets that phones will one day eliminate: wallets and keychains. Today the battle is being fought over the wallet, and the spoils in this war couldn’t be any larger.

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