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Consumers Can Take Google's Wallet to Stores

October 19, 2011

Google announced on Monday that its Wallet tap and pay system is now being accepted at stores operated by American Eagle Outfitters, The Container Store, Foot Locker, Guess, Jamba Juice, Macy's, OfficeMax and Toys "R" Us. It also said it was working with other merchants, including Chevron, D'Agostino, Faber News Now, Gristedes and Pinkberry, to enable Google Wallet purchases in those stores, as well.

With Google Wallet, consumers can walk into stores and simply tap their phone to pay for a purchase. Loyalty cards and/or key fobs will no longer be necessary at retailers as consumers load up Google Wallet loyalty cards onto the mobile phone app. Shoppers will also be able to access special "Featured Offers" available only to Google Wallet holders.

American Express, Citi, Discover, Mastercard and Visa have signed on as credit card partners for Google.

"It's still early days for Google Wallet, but this is an important step in expanding the ecosystem of participating merchants to make shopping faster and easier in more places," Spencer Spinnell, director of emerging markets for Google, told eWeek.

The biggest limitation, and it is big, according to eWeek is that the Wallet currently only works with Sprint's Nexus S 4G smartphone. Google is seeking to enable the Wallet app to work on other Android phones.

Security also remains a concern. In a May RetailWire poll, 42 percent cited privacy/security concerns as the biggest impediment to the rollout of Google's Wallet.

"Mobile payment technology, like any over the air, OTA, communication, is 'hackable,' even if someone does not have your cell phone," Jennifer L. Jacobson, director of shopping site Retrevo.com, told CNBC.

"Google has taken many precautions when it comes to security," Jason Hennessey, CEO of Everspeak Interactive, told CNBC. "Some might say that digital currency can oftentimes be more secure than regular currency. After all, you don't need to input a PIN every time you use your credit card."

FINANCIALS:     [NASDAQ:GOOG]

Discussion Questions:

Discussion Question: Will Google's Wallet be the turning point in bringing payments via smartphones to retail stores? What do you see as the opportunities and challenges around using mobile devices to make payments?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How sizable an upside/downside do you see for Google's Wallet technology?

Comments:

Whatever gets the customer to spend more money easily is the way to go. Virtual wallets are not new and have been used in Asia and Europe for quite some time. It's amazing that it took so long for it to finally come to North America. What I like about the e-wallet is the marketing that goes along with it. Now merchants have access to a ton of information about their customer and can tailor their offerings to better suit the individual customer.

Doron Levy, President, TheMortgageMachine.ca

I don't know for certain that Google's Wallet will be the one, however, I am absolutely, positively convinced that mobile payment technology will become extremely important over these next five years.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Google may not be the ultimate innovator of this version of the virtual wallet. But you can "bet the farm" that this will become huge and it will happen quickly.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I happen to be one of the few human beings who has actually made a Google Wallet payment (at 5:21 PM on September 26 at a CVS in Boston, to be exact). The process was simple enough, but the true power and potential of this technology is not in the payment per se, but rather in the opportunity for relevant marketing around the transaction.

We are at the leading edge of the single biggest transformation in the shape of a wallet since the introduction of credit cards in the '60s and '70s and the introduction of loyalty cards in the '80s and '90s. If anything, this transition will be even more significant because it is about making the payment process itself interactive.

Once the smartphone is the payment vehicle, marketers will be able to interact with shoppers along the full purchase path. Location-, time-, and preference-based marketing and offers can pull shoppers into retail locations they might not otherwise have visited. Once the shopper is shopping, behaviorally-targeted offers for items that particular retailer carries can shape and expand the shopping basket in real time. And offers and ads based on and presented in-line with the transaction itself can further upsell the shopper, or even drive them to their next purchase (either at that retailer or another one).

Will Google (and their bet on NFC) win this battle to be the new payment vehicle? Who knows. The exact technology of the payment is the part that matters least. It's the interactivity around the payment that matters most. This is an exciting time to be working on retail marketing!

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Ben Sprecher, Business Development, Google

A nice step forward. As Dorothy pointed out, retailers have an incentive to see it work too...so the question becomes, "How do we overcome security concerns from a consumer perception standpoint?" I am sure that some big brains have been working out the security mechanisms per se, but the shopper still needs assurance. Will the PIN make the shopper feel secure enough to plunge in? For younger shoppers, there is little doubt.

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Liz Crawford, VP, Strategy & Insights, Match Drive

This will certainly help move consumers into an e-wallet experience. However, it will take more phones, including the iPhone, to embrace this technology before it will really take off. This needs to be an "everywhere" app, before it will become used by everyone. Grocery stores, key retailers like Walmart, etc. all have to embrace this in addition to other phone manufacturers...only time will tell...

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Kai Clarke, CEO, American Retail Consultants

Google Wallet as the "turning point" in mobile payment usage would be a bit of an overstatement. But it's certainly a step in the right direction. And consumers like Google and their products, so I'd bet strong that usage will increase quickly.

Mobile payment, in general, is about convenience, which is one of the leading ways to attract consumers. Some retailers/products will be more suited to mobile payment, particularly if couponing becomes 'part of the deal' (pun intended).

As with any technology, there will be kinks, such as security issues, level of convenience, response sentiment, etc. But this doesn't mean you don't try. Google has certainly been an innovator in launching new digital technologies into the marketplace, and other brands should follow suit. It just has to be carefully implemented.

Ronnie Perchik, Founder/CEO, PromoAid

Security is always the concern with mobile payments, but whether it can be made secure is not so much the question as is how much hassle is introduced to the transaction process. Identity security has always revolved around three things: something the person knows (e.g. password), something they own (e.g. the phone or card), or a characteristic of the person (e.g. biometrics).

The Google Wallet requires the holder to key in a password. But the phone can't (yet) carry my dry cleaning ticket. Although it doesn't exactly look like Jason Alexander's, my wallet carries a lot more than cash or credit cards. The fundamental question is whether people will use the phone for payment if they still have to carry the wallet for everything else. The interesting thought is that the back end might encourage more people to use the Google Wallet than the front end. If linking the wallet to all my existing credit cards enables me to pay them with one transaction (possibly through the phone) it would make the back end much easier.

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Bill Bittner, Principal, BWH Consulting

It's just a matter of time until we no longer need cash. I rarely spend cash today and as this and other payment apps proliferate into the global marketplace, adoption will skyrocket.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Google is playing out an interesting preemptive power strategy here. By vigorously promoting its Wallet technology on the market before it is fully baked, it tries to block alternative smaller players from entering the market with solutions that may be ultimately more workable.

Seldom discussed in the media coverage is the payment mechanism, which requires network connectivity (presently Sprint) at the POS. If you can't connect, you'd better have your payment card in your pocket to complete the purchase.

From descriptions I've seen, Google's SingleTap process seems to require a tap-PIN-tap sequence -- tap to activate the app, enter a security PIN, then tap again to complete the payment. So, security assurances aside, true convenience is still many months -- even years -- away.

While I'm skeptical about Google's power-play go-to-market approach, I do believe NFC technology will ultimately prevail in the mobile payments arena. NFC-equipped readers cost just tens of dollars a unit. They are replaced at POS every couple of years anyway due to wear and tear. I've personally observed them in dozens of places around town. NFC-equipped smart phones will soon be the standard. Hardware ubiquity, in other words, is imminent.

Getting the software, features, network and usability right is the bigger challenge. Right now the hype machine is in overdrive at Google and its competitors like Venmo, Square, and MobilePayUSA. The Web sites are up, but nobody has delivered yet.

To all our tech journalist friends who seem giddy with admiration for Google Wallet, a word of advice: Apply some preemptive strategy of your own when covering this story. Don't just swallow the hype like you did with Groupon.

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James Tenser, Principal, VSN Strategies

The turning point will be when teenagers can use low-end phones to buy slurpees at 7-Eleven. Requiring a high-end phone that requires near field communication that only works on a high-end (4G no less) network at select locations is hardly "turning point" material. Google is clearly just piloting the concept and interested in "failing small". Interesting technology, years away from "main street" and the high school down the road.

Fabien Tiburce, CEO, Compliantia, Retail Audit & Task Management Software

Payment is the least interesting part of the solution. Coupons and loyalty are what will make NFC attractive to consumers. I can't tell whether Google, PayPal, Isis, or the individual efforts from Mastercard, Visa, and Amex will prevail. Yes, Google is getting a lot of press, but that doesn't guarantee success. When/if the iPhone 5 has NFC, things will really change.

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David Dorf, Sr. Director of Technology Strategy, Oracle Retail

I see the future of retail -- and definitely this ease of purchase is in it. Challenges are security, and technology that is never down.

Donna Brockway, President, FutureRetail

The opportunities are many but there are challenges. The first and perhaps most important challenge is consumer inertia. The truth is, my credit card works. My debit card works. There's very little burning platform for change if mobile payment is ONLY about payment. This means that the mobile wallet has to reach beyond the financial transaction and encompass promotion, loyalty, shopping and budgeting tools and more. It's these added benefits beyond payment that will break the inertia against change.

In the end however, this can't be about what brand of mobile device you choose to use. The payment platform will have to be OS agnostic in order for this to get wide ranging adoption. The question becomes one of self-interest. Will Google's own selfish desire to bring everyone over to Android get in the way of the success of the Wallet?

Doug Stephens, President, Retail Prophet

As I have said for some time, smart phones will play the same role in regular shopping as your GPS does in your regular driving -- that is, not much. This is until there is a regular reason to use the phone WHILE YOU ARE SHOPPING! And pay as you select, to eliminate paying at checkout, is the way for this to happen.

So this WILL work, whether now or at some time in the not distant future.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

I just got an Android-powered, flame-throwing, 4G, Samsung Galaxy S II from AT&T and got pretty excited at the beginning of this story. Then the Grinch - aka Jamie Tenser - turned the garden hose on me. His is the most realistic and cold-light-of-day assessment, I believe, and brought me back to reality.

Then I was reminded by my decades of experience with supermarket retailers that a major impediment to electronic wallets for them will be the cost of store-level systems and connectivity. Supermarket owners don't want to pay for ANYTHING, period. And, they're extremely protective of their customers' privacy. Someone will have to foot the bill for infrastructure should Google and others venture into that payment arena, where more transactions are conducted daily than in any other industry (a real plum for any service-cost-per-transaction model). And skeptical grocers - often even more mistrustful than their customers about privacy - will have to be convinced of any system's safety.

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M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

The "digital wallet" technology is the future. I don't know if Google's Wallet is the future, but this technology certainly is. From a marketing perspective, it's amazing. Being able to gather and track all that information and then use that information to advertise to people right on their phone based on what they just purchased. There's just so much potential. It really is an incredible time.

But, as of now, there are obviously a few hurdles I see that need to be overcome. I think the two biggest ones are availability and security. If Google is successful, someone will develop an similar App for the iPhone. If Google is smart, they will develop an App for the iPhone. For this to be truly successful, everyone with a smart phone should be able to use it. If Google doesn't create an app for the iPhone, they're opening themselves to competition. Competition who may decide to develop an app for both the Android and iPhone. By getting in early, they have the opportunity to corner the market.

That's a reason why Google's Wallet may not succeed. The reason the eWallet may not succeed is security. No matter how much companies like Google invest in making sure this is as secure as possible, people will still be hesitant. We are talking about their money after all. So their challenge is convincing people that using it is safe. People will want to use it, it's convenient and simple, but if they don't feel that it is safe to do it, it won't really matter. People will always be hesitant when it comes to their money, but over time, as a technology permeates society, people tend to become less hesitant and will feel safer using it. Whoever figures out how to make people to feel safe using their eWallet first will be the company that succeeds.

Like I said, this is the future. Maybe not for a few years but we will all have eWallets one day. Whether they are Google eWallets depends on how they handle these problems and what they do to overcome these hurdles.

'ChrisCatMan'

Google could very well be the wave that breaks the dam on mobile payment, and just as important, drives a leap-frog in mobile payment technology going straight to over-the-air payment instead of the expensive, complex, and costly NFC solutions. Question is, how will this affect the over-the-air strategies already underway at most major wireless carriers and who will be the dominant player in the huge potential market of over-the-air payment? Given this move, smart money may be betting on Google.

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Verlin Youd, Principal, VPY LLC

This could be a brilliant idea if the security aspect is really confirmed. But what about helping a customer spend, only within their means? Are there no limits and with the fun of using the app, will shoppers go overboard?

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Jerry Gelsomino, Principal, FutureBest

It is not certain whether Google Wallet will be the defacto NFC enabled mobile payment service in the market. However, it is certainly pushing the industry to pay attention and move things forward. This means the entire eco-system is waking up and working on their approaches to move NFC based mobile payment or mobile marketing services.

Consumer concerns of security, interoperable technology and familiarity are all manageable. The biggest challenges in developed markets are lack of strong business case without the presence of a dominant player to push the agenda and limited support from the regulatory environment to make this leap. Countries where NFC or other mobile based payments has taken off has had one of the above three catalysts present.

Ramesh Kumar, Managing Partner, zakipoint

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