What’s in Google’s Wallet?

Discussion
May 31, 2011
Tom Ryan

Google introduced Google Wallet, a contactless near field communication
(NFC) based cell phone payment platform, to much fanfare last week. The mobile
app for the Android operating system will not only allow consumers to wave
their cellphones at a retailer’s terminal to make a payment sans a credit card
but will also enable users to redeem special coupons and earn loyalty points.

At
a launch event in New York City, Google officials noted that 60 percent of
18-34 year-olds are comfortable using a mobile phone for payments. It also
displayed forecasts calling for half of smartphones to be NFC-enabled by 2014.

For its part, Google expects to earn money by making "Google
Offers" —
or advertising deals from local and online businesses — to consumers as they
shop. When shopping a store, an offer may be automatically factored into their
purchase. Users can also go to the web and find coupons and add them to their
digital wallet.  Like Groupon, Google collects a fee from participating retailers
every time a coupon is redeemed.

Retailers will be able to put loyalty cards
and coupons in the Wallet, helping them track and engage customers. Credit
card companies collect the same fee as a traditional credit card transaction.

Someday,
upon entering a store, consumers’ phones may serve up a list of
items they recently bought and offer related discounts, says Google. Eventually,
everything from boarding passes, tickets, ID and keys could be stored in the
Google Wallet.

Starting
this summer in New York City and San Francisco, the wallet will be available
on the Nexus S 4G phone on Sprint and be able to hold certain MasterCards issued
by Citibank. It will also hold a virtual Google Prepaid MasterCard.

The big
challenge appears to be getting other cellular carriers, banks, credit card
issuers, payment networks and technology companies — many
developing competing services — to support the initiative.

"We’re building
an open commerce ecosystem, and we’re planning to develop APIs that will enable
integration with numerous partners," Google
said in its blog entry.

PayPal also immediately filed a lawsuit alleging intellectual
theft. Security and privacy concerns are other obvious hurdles that Google
says it has addressed. Public education may be required and some wondered whether
Google’s offers will be enough to incentivize consumers.

A Forrester Research
note, Google Wallet Is Not About Mobile Payments, speculated that the
lack of phones with NFC technology and the need to upgrade retail terminals
will slow adaption, according to the New York Times. But Forrester believes
consumers will need more incentives to sign up.

"Google’s vision of incorporating loyalty, coupons, and digital receipts
will add meaningful value for consumers but will also require significant integration
by merchants and their vendors," the report stated.

Discussion Questions: Is the Google Wallet a good model for contactless payment services? What is your assessment of the challenges and opportunities in front of Google with this new service?

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17 Comments on "What’s in Google’s Wallet?"


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Ryan Mathews
Guest
8 years 2 months ago

The whole issue here is when, not if. Google’s move is an aggressive one that should speed the adoption of the technology but it is unlikely that big banks and credit card companies will fall over themselves helping Google capture the market. Another possible fly in the ointment? How about the study to be released today that may link cellphone use to certain brain cancers? The report already received some advanced press from CNN yesterday and is bound to send some folks skittering back to landlines, if just for a moment.

Max Goldberg
Guest
8 years 2 months ago

The quest for digital wallets has been around since the late 90s. Google’s entry into the field may finally make digital wallets a well-used reality. Google has the resources and staying power to accomplish what others have failed. If they can create a wallet that is secure, easy to use and save consumers time and money, Google could build demand. Consumer demand could spur retail interest, where new systems and technology will be required to accept the wallets. It’s about time that the payment industry was brought into the 21st century. Google is the company to do it.

Lisa Bradner
Guest
Lisa Bradner
8 years 2 months ago
Forrester analysts Charlie Golvin and Tom Husson do an excellent job in their report of pointing out both the opportunities and current limitations of this approach. Certainly there are network, retailer and payment limitations today and wholesale adoption will require overcoming all three. As Forrester points out this is really a discussion about the data. For years agencies, analytics firms and marketers have been striving via attribution models, direct customer modeling and CI to map the true path to purchase. While Google still can’t capture the top of the funnel, this play allows them to understand the path to purchase from search, to branded search, to retailer search (inclusive of offer and coupons) all the way to actual place of purchase. The company that can unpack and model this data owns the keys to the kingdom…which is why there will be a blood battle among retailers, carriers, data providers and advertisers as to who “owns” this data and how it’s used. Google has built an intelligent ecosystem of partners each with a stake in the… Read more »
David Dorf
Guest
8 years 2 months ago

We have a long way to go before NFC goes mainstream, but Google’s efforts are a great start. For this to catch on, a heavyweight like Google needs to unify the other players, such as credit card issuers, major retailers, and telco providers. Competition from similar projects will fragment the market and slow adoption. The key ingredient to success will be subsidizing NFC readers for retail chains in the short-term. Retailers need to be incented to uptake the new technology since there’s no immediate ROI. Once some major chains are accepting NFC transactions, further innovation will occur and adoption will jump the chasm. Until then, things will move slowly.

Gene Detroyer
Guest
8 years 2 months ago

Ironically, over a year ago we had a very significant discussion in my Entrepreneurship class about just this. Of course, the question at the time wasn’t on if this concept will work or not. The issue was “why don’t we have it?” The class was pretty unanimous in bringing up just the ideas that Google has outlined. These students understood what could be done with a smart phone and how much easier their commerce life would be. I can only conclude that this isn’t an idea that Google came up with in isolation. The idea is from an understanding of the generations that will drive commerce in the future.

The challenges for Google will be the competition. It will not be adoption. The banks and the retailer that don’t buy on will be left behind.

Gene Detroyer
Guest
8 years 2 months ago

A tangent to the discussion: I went to the movies on Saturday night. I bought my tickets online and had bar code sent to my phone. I arrived at the theater and showed the bar code. The theater didn’t have a reader. But they have apparently have been dealing with this for some time. They just waved me in. I imagine soon they will get a scanner, but in the meantime, they have nothing to do but accept the customer.

Ralph Jacobson
Guest
8 years 2 months ago

It’s about time Americans get on the train that other countries have been driving for years. There were test markets a few years ago in selected areas of the US, however those never caught on with the public. Google has the brand permission to make this a success and other enterprises will surely follow.

Dan Frechtling
Guest
8 years 2 months ago

NFC will take hold, just not overnight. The problem today is that it’s an ecosystem play in the primordial stages. Google smartly teamed with Citi/MasterCard to use PayPass. But from there it’s uphill.

1. Merchants. Why would they pay to install another swiping device at checkout? (Answer: By piggy-backing on PayPass, Google reduces some of the infrastructure investment needed.)
2. Consumers. Why would they forsake credit cards? (Answer: they won’t for the sake of convenience alone. They will for the sake of offers and discounts delivered to devices.)
3. Carriers/Handset makers. Why would they join Google’s effort? (Answer: They may not. There’s a reason why Sprint was first to sign up they are absent Isis, a Verizon/AT&T/T-Mobile partnership launching next year.)

There are multiple chicken-and-egg situations, as David suggests. However, NFC through various consortia will gain a foothold. Lisa points out the data advantages. Plus there’s precedent: look to Japan and Korea to see a full 20% of new credit cards are delivered via mobile phones.

Evan Schuman
Guest
Evan Schuman
8 years 2 months ago

I’m going along with the crowd on this one–mostly. So, yes, Google’s move is a great first start. There are, though, some serious hurdles. Despite all its talk of open platforms, clearly, this is an Android-only move. If Apple’s competing offer does not play well with Google’s Android move, will this split the market? Will some retailers opt for one over the other? Will there be a “for the good of the market” insistence that Apple’s and Google’s approaches most be compatible? Then there’s PayPal, which didn’t sue Google just to give their lawyers something to do. Google’s approach is the right one from a functionality perspective. But it’s single-platform approach is less than encouraging.

Doug Stephens
Guest
Doug Stephens
8 years 2 months ago

The Google Wallet model seems sound enough but these are really early days for mobile payment. The challenges ahead include the dog fight that’s going to occur over fees between the carriers, the banks and the processors. The other major hurdle is security–and yes we can expect a landslide of law suits in the meantime. Beyond everything else, the biggest challenge is going to be consumer acceptance, which will, as always, come slowly until we reach the all important tipping point. People I’m talking to in the industry are projecting that mobile payment won’t mainstream and become commonplace for up to 10 years. My guess is more like 5-7.

Matthew Keylock
Guest
Matthew Keylock
8 years 2 months ago

This launch certainly brings the reality of the “virtual wallet” one step closer. There are a lot of companies investing heavily to be winners in this space because it has the potential for disintermediation in a number of established industries such as payment processing and even retail. It’s already been called out in the comments but the key here, as ever, is about providing value to the customer. Some of this will come from the technology, much will come from the intelligent use of data to understand the customer and create relevant value for them at a highly personalized level.

Mike Spindler
Guest
Mike Spindler
8 years 2 months ago

Many such announcements in the last few weeks, but a number of interesting players. There will be a good deal of scurrying to align the necessary pieces. I have seen one technology that obviates the need for NFC and work with current scanner technology. Gonna happen. The real question is…who gets left out?

James Tenser
Guest
8 years 2 months ago
Close followers of NFC technology are well aware that Google is playing a calculated game of catch-up-then-dominate with this announcement. Its initiative is about half a year old, while startups in this space have been working out the kinks for at least four years. NFC-enabled payments at vending machines have been commonplace in Japan for years, and similarly in parts of Europe. Direct money transfer between cell phones is common in parts of Africa and the Middle East, where ATMs are nearly non-existent. The Galaxy S handset (not coincidentally an Android phone) is the first piece of hardware available in this country with NFC capabilities, but many more will follow in the next year, creating a long-anticipated user base. A consortium of the four largest telecom carriers got together a year ago to try to take hold of the NFC electronic wallet opportunity, but later fractured over strategic differences, after attempting to “drain the brains” of several hopeful innovators. Large banking institutions are also hot on this trail. With billions in transactions fees and “float”… Read more »
Kai Clarke
Guest
8 years 2 months ago

This is a push for the future. NFC is coming to all of the new phones (expected on the iPhone 5) and this will continue the push into electronic payments and processing. In just a few years we will be looking back at this date as a transition point in our move away from wallets, cards and cash….

Cathy Hotka
Guest
8 years 2 months ago

Retailers are genuinely excited about NFC, and customers will be looking for providers that can make it easiest and most rewarding for them. Not sure I want to let Google into my wallet, though…

Janet Dorenkott
Guest
Janet Dorenkott
8 years 2 months ago

This was a great announcement. My college kids and their friends were all talking about it this weekend. I’m looking forward to it as well. However, one word comes to mind that concerns me, “Security.” There are already devices that can intercept phone signals, how secure will this really be. Also, I know people put password protection on their phone, but this is often a pain. So don’t lose your phone!

Odonna Mathews
Guest
Odonna Mathews
8 years 2 months ago

I would be most concerned about how privacy is established with all the payment options and personal data stored on a cell phone.

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