Isis selects Gemalto to manage mobile payments for NFC wallet

Isis, the near field communication mobile wallet venture from Verizon (s vz), AT&T (s t) and T-Mobile, took another step forward with the announcement that it has selected SIM card maker and digital security specialist Gemalto as its trusted service manager (TSM) for the wallet. The deal means Gemalto will manage the secure element on Isis phones, overseeing the transfer of payment credentials from banks and payment services to the Isis wallet application on phones.

Gemalto will essentially hold the payment keys for Isis, controlling which service providers are able to tap Isis for contactless payments. It won’t participate in the actual transactions but will enable a host of applications, from payments to coupons and loyalty cards.

The deal is an important step for Isis, which is moving ahead toward a launch in the first half of 2012 in Salt Lake City and Austin before a larger nationwide roll out. The joint venture will compete with Google Wallet (s goog), which launched in September with partners Sprint (s s), MasterCard (s ma) and Citibank (s c) and First Data as its trusted service manager.

Gemalto is becoming a major player in the emerging market for TSMs. It has signed a deal to become the TSM for Deutsche Telekom and also Singapore’s nation-wide NFC system. It has also secured TSM deals with Barclaycard and Orange. Sebastian Cano, SVP Telecommucation for Gemalto, said the company has 45 NFC projects underway but the Isis deal would be the largest.

The deal is interesting because it follows word last week that Google Wallet has not been enabled to run on the Galaxy Nexus, Google’s flagship Android device which is expected to go on sale soon with Verizon. Verizon said it has not blocked the NFC application but is working on commercial talks with Google, which many have interpreted as Verizon holding back the wallet until its own Isis payment tool is available.

I asked Ryan Hughes, the CMO of Isis, about the situation and he declined to comment on the Verizon situation. But he said that the secure element must be managed by a TSM and the owner of the device, which will be the carriers in the case of Isis. Creating a completely open situation where any company or developer can access the secure element would not be safe or practical, he said.

“The secure element will not be an open asset to allow people to write content to it or it will lose the first portion of it birth name,” said Hughes. “Any suggestion that a secure element is an SDK that sits on top of an open OS is a fanciful argument.”

That suggests to me that we shouldn’t expect to see Google Wallet instantly enabled on Isis phones. It can still happen eventually and Verizon makes it sound like it’s just a matter of working things out with Google. But each Isis carrier will be able to decide what service provider gets access to their secure element, and it looks like it will not be a free-for-all. That makes sense on some level for security reasons but my hope is that ultimately, Isis members won’t find reasons to keep Google Wallet or other competing applications off their phones for too long. The NFC wallet market is just emerging and it will be good to have competition and options for consumers.