Google Wallet: Handicapping why it will (and won't) work

Google Wallet: Handicapping why it will (and won't) work

Summary: Google has launched its big move into mobile payments with Google Wallet. The big questions revolve around Google Wallet adoption and whether the search giant and partners can finally make mobile payments a reality.

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Google has launched its big move into mobile payments with Google Wallet. The big questions revolve around Google Wallet adoption and whether the search giant and partners can finally make mobile payments a reality.

First, Google's announcement of its mobile payment plans in New York featured a lot of heavy hitters in the retail and payment industry. With that start, Google is hoping more retailers, merchants and banks will join its effort. Google's vice president of commerce Stephanie Tilenius said an open ecosystem will set Google Wallet, which includes an Offers feature, apart.

Gallery: Google wants to revolutionize shopping (photos)

As noted previously, mobile commerce has the tech industry behind it. And Near Field Communication chips, which allow data to travel between two devices, like a smartphone and point-of-sale terminal, are ready to infiltrate smartphones. That move enables Google's grand plans for its Wallet, which will launch this summer.

Whether Google Wallet is a success or not will depend on multiple factors. Here's a look at some of the pros and cons involved with Google Wallet:

Pros:

  • Google has aligned itself with all of the key players in financial transactions. The most notable player in the picture to me is First Data, which serves as the backbone for many transactions behind the scenes. Mastercard, Citi and Sprint as well as retailers like Subway and Macy's are about the best line-up you could pull together at a launch.

  • Low risk transactions seed the market. If you notice Google Wallet's retail partners you'll find a bevy of specialists in smaller transactions. Think Subway, Peet's Coffee, Einstein Bagels and Jamba Juice. The consumer is more likely to try Google Wallet buying bagels and coffee than a PC at Best Buy.
  • Google is leveraging existing infrastructure. Google Wallet will work with the MasterCard PayPass network, which allows consumers to tap to pay at participating retailers. I've seen PayPass systems everywhere---MasterCard has more than 124,000 merchants in U.S. and 311,000 globally using the system. The problem: I've never seen a real live consumer use PayPass. The move to align Google Wallet with an existing tap payment system gives the search giant instant access and credibility. Partnerships with Verifone, Hypercom and others will put Google Wallet in next-gen point of sale terminals.

  • Convenience is another key feature. Google Wallet will have real appeal to Android customers that are lugging around a bunch of cards. It also doesn't hurt that Google's Android installed base is huge. These Android users are more likely to trust Google and adopt its various services.
  • An open ecosystem was played up. Google portrayed itself as an enabler---that's not collecting transaction fees yet. Google promised open APIs and connective tissue to enable mobile payments. That line will appeal to a bevy of financial players. After all, Google's monetization will come from Google Offers, its Groupon killer, as well as the advertising possibilities with users.

Add it up and Google Wallet could have some real momentum. The effort is as credible---if not more so---than anything else likely to come down the pike.

Now for those worry spots:

Cons:

  • Google Wallet needs more phones in the field. Google execs were showing off the Nexus S, but the reality is that NFC chips need to be in all phones to acquire a critical mass. These phones are coming, but they will take months to reach a wide swath of consumers.
  • The inclination to wait for other NFC moves. A lot of Apple users are likely to wait to see what Steve Jobs & Co. cooks up for the iPhone. However, I have a tough time envisioning Apple pulling together the ecosystem that Google just did out of the gate.
  • Security. Google executives also talked up security. The talked about tamper proof chips found in passports as well as PINs and shutoff mechanisms so you can't skim Google Wallet's data. Overall, Google Wallet is safer than handing a waiter your credit card, but selling consumers on this payment system could be tricky. Google said that consumers could store cards, drivers licenses, IDs and other items in Google Wallet. That's a lot of undiversified trust in Google.

  • Google needs more carrier support. Sprint is a nice launch customer, but the company really needs Verizon and AT&T in the fold too. To date, Google's first release of Google Wallet will come on the Nexus S 4G. The Nexus S is Sprint's bestselling phone, but the numbers are relatively small.
  • Habits. Tilenius acknowledged that "this vision will take a while to come to fruition." A field test starts today, and Google Wallet will officially launch this summer in San Francisco and New York City first, followed by a roll-out nationwide. That rollout is the least of Google's worries. Google will get early adopters on board, but the masses may be reticent. New payment methods are adopted slowly in the U.S. Folks transfer money via text messages in Turkey. No such luck here.

Bottom line: On the adoption front, Google's success or failure with Google Wallet looks like a jump ball. One thing is certain: If mobile payments finally take hold and go mainstream Google will be a player in the industry.

Topics: Banking, Enterprise Software, Google

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49 comments
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  • NFC Security

    A lot of the talk about NFC and smart phone security seems to focus on the visual display. You can lock the phone, you need to enter a pin #, the entire card is not visually displayed.

    What people forget about NFC is the NFC. How do you protect your phone from broadcasting your credit card information in a crowded mall?
    Your Non Advocate
    • RE: Google Wallet: Handicapping why it will (and won't) work

      @facebook@... Google said when the screen is dark the NFC is off. it only comes on when you do your pin and give it permission
      Larry Dignan
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @Larry Dignan
        facebook@... still makes a great point. A malware attack to activate the NFC could broadcast the account information to listeners. I am not overly excited about this technology, and I know that a lot of companies are bringing this out. Color me concerned.
        hoaxoner
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @Larry Dignan OK, so that means that the hacker must put his reader within close proximity to the cash register. An inconspicuously looking reader located near a high traffic cash register can collect a lot of credit cards in a day.
        Your Non Advocate
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @facebook@...
        But this can happen today.
        I suspect we will likely see a small number and it will be independent of the technology actually deployed.
        Call it growing pains.

        Overall though, it looks to be more secure than a lot of the information today.

        Fyi - try this for a concern:
        Put your phone on video record - and act like you are browsing near a register. Provided your resolution is good enough - you can get card, name and if they flip it, the security code on the back. It is amazing how careless folks are...... :O
        rhonin
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @Larry Dignan says "But this can happen today. "

        The difference is that there is a legal liability of $50.00 if my charge card or it's numbers are stolen. Once the bad guys get thsi, who pays the damages?
        rwgreene
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @rhonin

        True enough statements. If you can position two cameras in such a way that it can consistently read both the card # and the 3 digit code at the back of the card you can grab credit card numbers.

        However, NFC is not impaired by line of site constraints and a single device can read both the card # and the 3 digit code.

        NFC is more akin to big box stores like Best Buy that was using unprotected wireless networks to transmit credit card data back and forth from front end terminals and back end systems.

        It is easy enough to dismiss the possibility. However, all too often with IT, every one is wise after the event.
        Your Non Advocate
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @facebook@...
        True.
        I mentioned the camera incident after I have seen more than a few standing in a check out line handle their card in a way that i can easily read both sides during their checkout process. Add my camera on my phone and poof!

        It's amazing. :O
        rhonin
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @facebook@

        NFC only works for a distance of 4cm or less. It won't be easy to place a reader next to cash register to steal credit card information. Also, I assume the software will require user's explicit approval before sending the details.

        Pretty secure to me, compared to the plastic card today.
        tommy-t
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @Larry Dignan
        Hopefully they wont be broadcasting it unencrypted and in plain text format. With Google's latest security blunders I would never trust it.
        audidiablo
    • RE: Google Wallet: Handicapping why it will (and won't) work

      @facebook@... and others...
      Let me just say this, it's going to happen. It is in fact, happening. Will there be growing pains, you betcha! Will some tech guy / hacker / your next door neighbor figure out holes in the system, of course. But, in the end will we as consumers feel waving a device is simpler than handing a piece of plastic is easier and subsequently 'better'? Yup. I've been around for the growth of credit cards (yes, there was a time when they were very rare!) and people thought that was nuts. "All somebody has to do is steal my credit card..." Google? Apple? 'the next guy'?, etc... doesn't really matter in the long run, it'll be a personal choice just like your bank is a personal choice now. I'm not saying jump on board, i'm saying acknowledge it, and plan accordingly. Truth be told, I probably will wait for the Apple solution, but that's just because I graduated in 1984...
      kevin7d
    • RE: Google Wallet: Handicapping why it will (and won't) work

      @facebook@... The hacker might be a bit further away. Maybe 9-12 feet. The point is, how do you make sure the signal gets turned off quickly and is this really more convenient than just swiping a credit card to be worth any risk?
      hforman@...
  • RE: Google Wallet: Handicapping why it will (and won't) work

    i'm using the Starbucks IPhone app to pay for my cappuccino, and find it very effective. what is the usage rate for this tool? I think it is a great idea for small purchases as u said, such as newspapers, coffee, etc. dont see it for anything large.
    jchait50
    • RE: Google Wallet: Handicapping why it will (and won't) work

      @jchait50 I agree; I use it all the time and it works great. The only problem I have with it is that your Starbucks account doesn't actually tell you what you bought. I don't really understand why they can't do that since they're just ringing up items that are in the POS systems. Other than that, it's super easy to use and I could definitely get used to paying like that for other things.

      Rob
      Itemize.com
      Rob_at_Itemize
  • No Thanks!

    I'll let Google fiddle-f*ck around and make all the mistakes while I wait for Apple iCurrency. It won't be long before the IMF will be transferring funds via iTunes!
    Gr8Music
    • RE: Google Wallet: Handicapping why it will (and won't) work

      @Gr8Music
      Like companies are really going to get on board with Apple taking 30% of their NFC purchases. Please.

      Google is doing it first, and doing it right.
      Droid101
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @Droid101 Google doesn't do many things right, except search and even now, most searches give you the same site in the top 10 list, just different pages. e.g. Just look at Buzz, indexing people's voicemail, video, most of there things are average at best, plus most of there interfaces such from a design standpoint.
        davefm@...
      • RE: Google Wallet: Handicapping why it will (and won't) work

        @davefm@...
        What about chrome and android ??
        pinkfloydhighhopes
    • RE: Google Wallet: Handicapping why it will (and won't) work

      @Gr8Music
      Whoa dude!
      I would never let iTunes do any of that.

      @Droid101 - true.

      :)
      rhonin
    • RE: Google Wallet: Handicapping why it will (and won't) work

      @Gr8Music
      Nice troll!
      A.Sinic