A dust-up is brewing in mobile payments, pitting Isis against Best Buy, 7-Eleven

Best Buy and 7-Eleven have started shutting down near-field communications (NFC) capabilities in their stores’ point-of-sale terminals, making it even harder for Isis and Google to get their fledgling smartphone payments services off the ground.

According to a report in ComputerWorld, payments technology analysts say Best Buy and 7-Eleven began disabling the NFC readers at their checkout stands simply because of the expense. NFC-powered mobile payments have barely cracked the surface in the U.S. – stymied in part by turf wars between Isis and Google – so big retailers see little reason to support it and other smart card technologies. Also, banks are charging higher transaction fees for smart card and NFC payments, giving retailers even less incentive to get behind smartphone payment services.

But there could be a third reason that Best Buy and 7-Eleven aren’t keen on NFC. They’re part of a consortium of big retailers called the Merchant Customer Exchange, or MCX, which is launching a competing mobile payments platform that relies on barcode readers, similar to the setup at Starbucks.

Starbucks barcode-reading mobile transaction system (source: Starbucks)

If MCX’s big retailers – which include Target, Walmart, Sears and CVS – wanted to put Isis and Google Wallet on ice while they prepped their own payments platform, flipping the NFC switch to off would be a good way to do it. Isis CTO Scott Mulloy didn’t go so far as to accuse MCX retailers of unfair play, but he did say they were harming the smartphone payments and smart card industries.

“A handful of retailers are moving counter to the broader industry movement towards more secure payment technologies,” Mulloy told ComputerWorld. “This affects millions of contactless [smartcards] already in circulation as well as new mobile wallet innovations. It’s a massive step backwards.”

Of course, you could make the exact same charge about Isis and its founding members Verizon, AT&T and T-Mobile. While Isis spent years getting its act together, it fended off competition from Google by simply banning Wallet from NFC transactions on their smartphones. Google finally got around it in its latest OS, KitKat, which allows mobile apps to bypass the secure element in Isis smartphones.

That spat, however, not only hindered Google Wallet’s traction, it probably set the already nascent smartphone payments industry a year or two back and slowed down the migration of NFC into handsets. If this to-do over NFC between Isis and Best Buy and 7-Eleven turns into a war with MCX, then it could be the final death blow for NFC payments in the U.S. The idea behind having smartphone wallet is that you can use it anywhere, and anywhere has to include at the checkout stands of the big retailers.