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Google Wallet’s Ambitious Vision Faces Intensifying Competition, Technology Hurdles
Google Wallet Product Manager Robin Dua says in the video below that Google wants Wallet to “electronify” your wallet and become “the central way [consumers] make purchases.” The scope of ambition behind this statement can’t be overstated.
Beyond consumer purchases, Google envisions Wallet (online and mobile) to be a kind of ecosystem and platform for merchants. If successful, Google Wallet would help merchants (and advertisers) track online marketing to the offline point of sale, “closing the loop.” It would also be a loyalty platform and would hook up with AdWords, email marketing, social media and business websites.
But that ambitious vision may never be fully realized.
Google assumes that near-field communications (NFC), the technology behind the mobile version Google Wallet, will become a ubiquitous standard in the very near term. But that’s a risky bet. While NFC will certainly proliferate — there’s a question about whether it will be in the next iPhone — the precise timing of NFC adoption by consumers and merchants is much less certain.
The mobile version of Google Wallet requires an NFC-enabled mobile phone and NFC-capable point of sale (POS) terminals. In the absence of both mobile Google Wallet essentially won’t work. There are some workarounds on both sides but they’re cumbersome.
European research firm Berg Insight reports that there were roughly 3.9 million NFC-capable merchant POS terminals globally at the end of last year. The firm expects that number to grow to 43 million by 2017. It also expects 86 percent of US merchants to be able to accept NFC-based payments by the end of the forecast period (2017).
But five years is a lifetime in technology. Currently in the US there may be up to 300,000 NFC POS terminals available. Google says Wallet can be used at up to 200,000 retail locations today. Despite the fact that all new Android handsets will be NFC-enabled, there are only six handsets on two carriers (Sprint and Sprint-owned VirginMobileUSA) that officially support Google Wallet right now.
Verizon, T-Mobile and AT&T don’t officially support Google Wallet (or didn’t) — not for technology reasons but likely because these carriers have their own competing payments platform (ISIS) in the works. After a period of delay ISIS will launch next month in two US test markets (Salt Lake City and Austin) according to the company, which can be thought of as “Hulu for mobile payments.”
Verizon had blocked Google Wallet for security reasons initially. It’s not clear now what Verizon’s or AT&T’s official policies toward Google Wallet are. It does appear however that users on those networks can install/use Wallet on NFC-enabled phones such as the Galaxy Nexus. We’ve asked Google for a comment and will update this post if we get clarification.
In addition to ISIS, which mimics Google Wallet in most of its goals, there are well over a dozen mobile payments companies operating in the US today. To name just a few: PayPal, Square, LevelUp, GoPayment (Intuit), PayAnywhere, SAIL (Verifone), Boku, GoPago, Dwolla and First Data. The majority of these providers don’t require or rely upon NFC technology. Thus they can be used today by most merchants and consumers.
Many of these companies use the Square card-swipe approach (pictured above) today; however most of these same companies are seeking to move to a system where consumers pay through mobile apps (e.g., Pay with Square) and there’s no card swipe at the POS — nor is NFC required. As another alternative, PayPal uses the consumer’s mobile phone number and a PIN to authorize in-store payments. This also doesn’t require an NFC terminal. And PayPal’s in-store system will be available at roughly seven million US merchant locations (via the Discover network) by late 2013.
These alternative approaches to NFC-based payments may gain much faster adoption by both merchants and consumers. And that could marginalize Google Wallet, though it’s safe to say that a single mobile payments approach is likely to dominate the market in the near term.
In a bid to broaden the utility and appeal of Google Wallet it appears that Google Wallet will duplicate Apple’s forthcoming Passbook capabilities and include transit passes, airline boarding passes and other kinds of tickets. This may drive some additional consumer adoption but only at the margins.
Google Wallet is a great product. But almost no one is using it today. My own very informal surveys of merchants in the San Francisco Bay Area with NFC POS terminals suggest that there has been some uptick in usage of NFC payments but it’s a tiny minority of people. Furthermore most Americans have yet to be convinced that they need mobile payments at all.
Source: Opus Research, August 2012 (n=1,501)
The video below features Google Wallet Product Manager Robin Dua talking about the product’s features and the vision behind it.
Postscript: I have discovered that that there is no Verizon Android device that officially supports Google Wallet, although the Galaxy Nexus has the NFC chip. In addition, select AT&T Android phones that have an NFC chip/capability (e.g., HTC One X) can also support Google Wallet. However AT&T hasn’t promoted this capability and it’s confusing to figure out which models do permit it.
Finally T-Mobile also doesn’t officially support Google Wallet.
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