Google Wallet: Timely or Ahead of Its Time?
In January, I wrote about Googleâ€™s potential leg up in the NFC (Near Field Communications) space because of the companyâ€™s NFC-friendly Android operating system. Now Google has introduced a real product that leverages that technology. Itâ€™s called Google Wallet and it essentially turns a Droid into a mobile payment device. You wave your phone instead of a conventional credit card at a MasterCard PayPass terminal and presto, youâ€™ve charged your purchase.
While some may now proclaim Google the instant leader in mobile payments, itâ€™s a little more complicated than that.
On the positive side, Google Wallet was introduced with both some major financial services firms and retailers behind it. Google is partnering with MasterCard and Citi in launching Google Wallet, and it smartly lined up a number of key retailers in support of the application â€“ American Eagle, Bloomingdales, Macyâ€™s, Subway and Walgreenâ€™s, among others. All of these players have a vested interest in making Google Wallet a success. Subway is especially notable because as the largest fast food chain in the world, it could drive adoption pretty quickly.
Google made another strategic move that could prompt broad acceptance, announcing that it would not charge transaction fees for the usage of Google Wallet (more about that in a moment). This will encourage banks to play along, since the new payment method will not cut into the revenue they collect from merchants and consumers.
On the other side of it, the only major mobile phone carrier in the U.S. to announce its support of Google Wallet at present is Sprint, considered the weakest of the bunch. AT&T, T-Mobile, and Verizon are staying on the sidelines for now, waiting to see if Isis, a mobile commerce network they all back, will become a reality. Not surprisingly, Apple and RIM also held back support, since they are the producers of the major competitors to Droid, iPhone and BlackBerry.
So how, exactly, will Google make money on Google Wallet if they are not charging transaction fees? Through the standard and very successful Google model â€“ by generating revenue through advertising. And that may be the biggest part of the story at the moment. At the same time Google Wallet was introduced, the company debuted Google Offers, a Groupon look-alike. Taken together, Google Wallet and Google Offers is a powerful pairing, writes Kunur Patel in Ad Age:
â€œThis Wallet-plus-Offers combination has likely left Groupon sweating for the first time. â€¦Google looks to be leapfrogging Groupon in bringing deals to mobile. If it works, Googleâ€™s product will distribute the type of deals Groupon made possible via email to the Wallet app, as well as other Google apps â€“ such as Shopper â€“ and in online search.â€
Imagine the ability to consolidate offers and coupons from merchants in combination with the ease of paying by simply swiping a smartphone. Pretty cool.
One critical question remains unanswered, however â€“ whether American consumers are ready for NFC-enabled payment systems. The U.S. mobile phone market has lagged behind Europe and Asia. Using a smartphone for financial transactions is still a novelty here. One significant barrier: Americans will likely have to get over security concerns related to having sensitive credit card data on their smartphones, even though PINs are required for transactions.
There is an emerging U.S. market for NFC, though, as smartphones become central to connected life. In fact, Google was preceded in the market by others, including Square, a 2009 start-up. Square makes a card reader device that attaches to phones with the Android operating system, as well as the iPhone, iPod Touch, and iPad, enabling merchants to accept credit card payments via the mobile phone. Square just introduced an updated iPad app that allows participating merchants to make offers to consumers and also enables consumers to create a digital wallet called â€œCard Caseâ€ that stores payment information for specific retailers. Of course, Square doesnâ€™t have the financial clout of Google.
Google Wallet and Google Offers are expected to take some time to spread out across the country. It will probably be the summer before merchants are ready to accept Google Wallet payments since they have to upgrade their payment systems. In the meantime, the primary impact of Google Wallet may be the buzz, and that may be enough. Google Wallet brings the mark of Google legitimacy to the notion of paying with a smartphone. That alone could fuel quick acceptance of the technology by provider and consumer alike.
About Barry Silverstein
Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the worldâ€™s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.