Trouble brewing for Google Wallet


I believe in Google’s capability to actually pull off mobile payments. I believe they do get it. With all its initial failings, its misplaced loyalty towards NFC and the existing payment rails, I believe they truly have a shot at fixing payments and closing the loop in local commerce. Let’s look at what is going right for them: Android is fast becoming the dominant ecosystem on mobile, with over 200 Million devices so far, and 550k activations happening each day. They have made Android a force of nature, that is now slowly eating away at Apple’s market share. They have a mobile wallet initiative out at front, at least more than a year before the closest competitor they have – in Isis. They have had some notable successes with retailers (for e.g. Gap) and has partnered with NJ transit for payments. Formidable partnerships with Citi, FirstData and MC should be all that is enough to prod more issuers in to joining Google Wallet. Despite all this momentum, Google Wallet does not seem to be having a good day so far.

Despite Visa’s significant call for EMV in the U.S by way of threats to shift fraud liabilities to processors (and from there to merchants), balanced equally by the carrot of PCI audit compliance avoidance, NFC still faces considerable challenges to adoption. Apple chose not to include NFC in iPhone4S, knowing fully that to do so with out first creating a compelling commerce solution (the strains of which were heard in its recently revamped Retail app enabling easy payments in stores) would be advantageous to Google or others. Rumors are abound that Isis Carriers are discouraging Google Wallet from being included on the Android phones provisioned on their networks, which has far reaching implications for both Google and Android. Meanwhile, Amazon has the clout to both build a payments presence and roll it out as part of its forked Android flavor – Fire. But more importantly, Google Wallet is lacking what it needs most to make an impact – Issuers.

Issuing Banks are not exactly lining up on the streets to sign up with Google Wallet. In fact news broke recently that indicated that Isis landed three much coveted issuers including JP Morgan Chase, US Bank and Capital One. Seems that Banks, genuinely fearing disintermediation by Google, are more inclined to pay (if required) a rental fee and share the interchange fees (again – if required) with Isis rather than inviting Google to the party. Yet another complaint from the issuers seems to be that the Google Wallet solution seems to be oriented primarily around Google, and that there is very little room (and branding) in there for issuers, other than providing the rails and supporting infrastructure. Issuers see this is a losing proposition for them rather than a winning one. They fear being marginalized by Google and losing customer mindshare to Google, once it is able to create a compelling wallet experience by weaving together loyalty, rewards and payments at the point-of-sale. Google (and Apple, and Square, and Dwolla, and Paypal, and BankSimple, and Movenbank and many others) are the barbarians at the gate, clamoring for their spoils, their hoarded treasure, a threat to the oligarchy asleep, cloistered behind the tall gates. So what should Google do? Should they curry favor with those who are nonchalant or disenchanted? Absolutely not. Let Google be Google. Let that be the rallying cry.

And what about banks? Are they justified in their lack of trust in Google and others? Or are their newly formed allegiances with Isis grounded in the realization that the Carriers hold far more power than Google? It also has to be, that as the one who enrolls customers, Carriers are being recognized by Banks as the one who controls the phone and possibly the relationship with the customer, maybe more than Google. With over 200 Million phones combinedly served by the Isis Carriers, it can offer the scale that is necessary for mobile payments to succeed. Moreover, at least in U.S, Carriers seem more inclined to partner with the issuers than go at it alone.

In the end, Banks would be better served if they understood that disintermediation will occur with or without Google. That Isis, Google Wallet, Square, Paypal, Bank Simple or the 70 other mobile wallet initiatives out there, will eventually offer their customers a value proposition that far exceeds anything else in their quiver of arrows presently. And THAT in the end, is inevitable. The only question is whether they have the fortitude to ask themselves as to what the others may have in their quiver(no more archery analogies!), that will make them irrelevant to their customers in 2, 3, or 5 years..and act swiftly on that premise, so that their competitors do not get there first. Or they could chose to be Bank Of America and obsess over $5. Customer relationships be damned.

Note: Google has indicated that it will support Credit Unions on its Wallet in future iterations. But at the very least it needs to show some love towards small-mid banks. Currently, it has shunned this promising sector and it might just be one more of Google’s follies that it will come to regret.

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Board of Advisors at SimplyTapp - creators of Host Card Emulation driving democratization and open access to NFC in Android. Mobile Commerce & Payments Lead at Experian Global Consulting, serving Experian's clients in Banking, Retail, Consumer Credit & Payments. A strategic adviser w/ over 17 years of international Tech & Business Strategy consulting, advising firms in banking, retail & asset mgmt that seek clarity & insight in to the myriad business models around payments, fraud & commerce. Founded DROP Labs, a mobile payments/commerce strategy & advisory practice. Tweets here. I'm on LinkedIn here.
Cherian Abraham
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