On the road with Google Wallet


I rode about 900 miles in the last four days, cutting across Virginia, Maryland, Pennsylvania and New Jersey to be together with my family for Christmas. I figured this would be a good time to put my new Galaxy Nexus and the Google Wallet app through its paces. Following are my impressions from it, which as a whole was very cool and satisfying. But (and there is always a but..) it also brought to surface some serious handicaps, which though not Google’s fault, could bring its wallet initiative down like a lead balloon.

Three days after Verizon launched Galaxy Nexus topped with delicious Ice cream sandwich to boot, thanks to a bunch of tenacious Android aficionados, I had thumbed my nose at Verizon and got Google Wallet running on it. Despite all the wrangling and public airing of differences between Verizon and Google, it took me all of 60 seconds to download the .apk and to get it going. Much ado about nothing, indeed.

The first thing you notice while launching Google Wallet is how purty it looks. Upon entering a previously agreed upon 4 digit PIN, it allows you in, and Payment Cards, Loyalty Cards, Offers & Transactions are all at your finger tips. I set up my Citi World Dividend card and the Google Prepaid Card that comes with a $10 infusion courtesy Google (Thanks GOOG!).

The first transaction at a McDonald’s equipped with MC Paypass terminals went with out a hitch. Paying by Google Wallet was unquestionably new and cool to both of us. Just to be difficult and out of sheer curiosity, I completed two transactions – one each via Citi and the Google Prepaid card. Emboldened by how smooth it went, I pulled out my phone every chance I got during my roadtrip, and provided the retailer had a paypass terminal handy, went ahead and paid using my phone to hushed tones of awe and envy. My inner 8 year old had a field day!.

First thoughts:

The Google Wallet app is solid. It abstracts the complexity and ugliness of payment and renders itself fluidly on the Galaxy Nexus (albeit with a bit of slowdown at times when swiping between cards). It worked consistently every time, whether the Wallet was open or not. One time, the store clerk did not even know it was a tap and not a swipe, or she did not care, or maybe her last customer was the Pope. But plain as my transactions were, they did not seem to require any employee training as long as the customer was savvy, and the experience was frictionless to a fault. Admittedly, when one throws in a couple of coupons – digital or otherwise, or splits a transaction on to two credit cards – one plastic for example, you should see complexity creeping back in to the experience. But for 95% (arbitrary as they come!) of the transactions, they should go flawlessly.

Google Prepaid Card:

More over, the Google Prepaid card is a brilliant idea from Google’s perspective. Infact, instead of being handicapped by NFC at the point of sale, Google should have preloaded its wallet with $10 and encouraged everyone with a half decent Android phone to install and make online payments with Google Wallet. I have already played this tune once before, so I wont attempt it here. Another advantage of a Google Prepaid card, will be when Google, as it finds working with issuers more trouble than its worth, and merchants apathetic to bearing cost of upgrading to contactless infrastructure while being stuck at the same interchange fee structure, could energize merchant adoption by offering an interchange free model, provided customers use Google Prepaid card to pay at the point of sale. Google can incentivize this on both fronts – merchant and customer alike and bring on the fabled mobile commerce tipping point, far sooner than it is now.

Next steps:

And finally, Google Wallet in its current state is only a first step towards a future where payments and customer-merchant interactions are driven by mobile wallets. But for mobile payments to be meaningful, beyond simply enabling payments at the point of sale, they have to enable one or more of the scenarios outlined below. I am quoting these verbatim from the whitepaper I produced earlier this year and which can be downloaded here. These perceived interactions simply constitute a shape of things to come, but must come none the less.

  1. Indicate to the customer how many rewards points she stand to gain by completing the purchase.
  2. Provide a transaction summary right away along with any rewards points accrued or redeemed as part of the purchase
  3. Allow the customer to redeem his rewards points instead of cash/credit at the POS and abstract all the complexity of that redemption from both the customer and the merchant
  4. Indicate to the customer if she so prefers, for a given retail category, where she stands for that current month in terms of expenses (e.g. $150 in Gas, $200 in eating out etc.)
  5. Warn the customer if she has insufficient funds to clear the transaction. Or better, if the purchase will in turn overdraw the account so that any scheduled bills or checks would not clear, then warn the customer.
  6. If the customer has one or more credit/debit cards with the bank, then default to the card that will provide the maximum value, in terms of rewards accrued or a favorable interest rate. Or pick a credit card that has a coupon that could be applied to this payment. Allow the customer to choose if there is more than one.
  7. Issuance of value stores including prepaid debit cards that automatically unlock to release funds when in proximity to a particular store, location or when used for a specific retail category.
  8. Use location and the purchased item as context and suggest to the customer a recommended accessory to her purchase at the same or a nearby store.
  9. Use location and time of day along with the social graph of the customer to recommend new retail experiences.
  10. Use past purchase history along with frequency of purchases on specific retail categories to deliver localized offers from nearby merchants.
  11. Provide couponing capabilities that just works – including picking the right coupon at the POS without the customer having to remember.
  12. If the bank deems the purchase amount to be significant, and requires that the customer credit limit to be raised, then it should do an STP (Straight through processing) and ask the customer whether to raise her limit.

All of the above interactions require a leap of faith by wallet partners, a commitment that goes beyond what they are willing or able to commit today. But without it, Google Wallet, Isis and other initiatives will reach for, but never truly, connect.

Now that I talked over what works, lets talk about what does not.

Broken & needs fixing:

Google Wallet is all Google. Now that may not be a bad thing, if it were a solution that had been built ground up by Google. But, it is not. The payment rails that Google Wallet runs on, is several decades old and its effort to leverage off of it comes across not as incremental, but instead as a total rebranding effort. That for obvious reasons is seen as an affront to the broader payment industry, including possibly Google Wallet partners and is apparent in its failings as I describe below.

Offer Redemption – Closing the redemption loop has been the holy grail in local commerce and mobile has long been touted as the missing link that could make it happen. But if the current Google Wallet app is any evidence, we are a ways off. Offers are off to the side on another tab, instead of being front and center. In fact, if there was any offer that might have been applicable at the retailer I was patronizing at the moment, I would have had to dig through the offers tab to find it. And to expect me to do so at the point-of-sale, would have been anything but frictionless. Instead, when I bring up Google Wallet, regardless of what my default credit card of choice may be, the wallet app should overlay any applicable discounts or offers on top, so that I can choose a different card to pay that will net me more rewards, more points, and possibly cost less money. But to also successfully do so, it has to know which retailer I am at, and therein lies the core issue discussed next –

Transaction History shows merchant and price paid for only transactions made using the Google Prepaid card, and not for my Citi credit card. This is what threw me for a loop. For Google Prepaid transactions, the merchant name shows up in a few minutes, but the Citi transactions show “PayPass Merchant” for merchant name and “Sent” (????) for Amount paid. It seems that Citi, the only issuer backing Google Wallet, opted NOT to share merchant and paid information with Google in the first large scale, tangible mobile payment initiative in history. If that does not reek of mistrust, I don’t know what does. Whatever may be the reasons behind such a move, Citi, in my opinion has seriously handicapped the Google Wallet app, by depriving it of any meaningful value the customer can derive out of using mobile as the new payment form factor. If my only thrill is to whip out a phone instead of plastic, tap instead of swipe, and the end result is the same, then why all the hoopla? When I check my transaction history, all I see is “PayPass Merchant” and “Sent” row after row with respective date and time, how meaningful is that compared to printed receipts and monthly statements?

Citi may feel all smug about removing (or at the very least delaying) the threat of disintermediation from its partner and a potential disruptor. But by doing so, it has proven its lack of commitment to every new issuer who intends to potentially partner up on Google Wallet and its cries for interoperability and trust will land on deaf ears. I am interested in hearing about whether there are any legal ramifications about sharing transaction information with Google, when it is playing the role of a facilitator (If you have any perspective other than mine, kindly comment below). Citi has also de-clawed another value add – in this case MasterCard’s InControl service which could potentially provide instantaneous feedback to the customer after purchase as to how they are faring in individual retail categories ($200 monthly limit for eating out vs $150 for Gas) – so that they can manage their household budgets better. If I need to wait till the end of the day, or worse – end of the month for that sort of feedback, then let me ask once again – why all the hoopla about mobile payments?

More over, this is a bump in the road for Google. Google can still look at aggregates, the number of transactions from a specific location and marry that with its extensive geo-spatial POI data to arrive at some very close educated guesses as to who the merchant is. With its efforts to provide indoor mapping and location based services getting less battery thirsty, in time Google will be able to do most of what it needs to do. But us consumers, the schmucks who completed the transaction are stuck at “PayPass Merchant” and “Sent”. Zero context, if you ask me.

Its like throwing a chick off a cliff with its wings taped together screaming – Fly! Dammit! Fly!

If I could recommend, then for both consumers and merchants alike, I would recommend that they skip over Citi and use the Google Prepaid card for their payments, if they want any meaningful transaction history. That is not to say that Google should keep it as it is – it should leverage history to both provide context as well as recommend new retail experiences, all the while being respectful of my privacy. And Google should make its Prepaid platform appealing for merchants to adopt and incentivize the same for consumers through tailored discounts and offers. As it is right now, Citi is not the shining example Google needs to bring more issuers onboard. Citi may be forced to reconsider if Google is able to either get enough issuers onboard who are willing to share, or can build enough customer participation to force Citi’s hand. Both are up in the air at this point, and may never come to fruition. And customers who, unlike me, are comfortable using an existing payment provider over Google, will never experience the benefit of mobile payments beyond the act of payment. And that’s a shame.

In closing, is this evidence of a clash of cultures, between a payment oligarchy and a possible disruptor? Of wanting to protect one’s turf, and yet be seen to customers and others as a first mover? Customers are pretty discerning these days and they can spot a fake from miles away. We can distinguish commitment from when you are throwing a chick off a cliff with its wings taped together screaming – Fly! Dammit! Fly!. For my part, I loaded $20 on to my Google Prepaid Card via my BOA credit card as I made my new year resolution few days early, that I shall use a Prepaid account till Citi gets its act together. Or until, Isis knows better and tries harder. Citi, are you listening?

**Update** – Five days after I activated my Citi Dividend Card via Google Wallet, Citi mails me a printed letter welcoming me to Google Wallet. Goes to show how issuers, in this case Citi, continue to be oblivious of their customer’s channel usage preferences. Surely a FacePalm moment?

If you agree or disagree, skip on down and call me out below:

If you read this far, you should follow me on Twitter here. Connect with me on LinkedIn here.

I am the Mobile Commerce and Payments Lead at Experian Global Consulting and I serve Experian's clients in Banking, Retail, Consumer Credit and Payments on strategy, innovation and emerging business models around mobile. I am on the Advisory Board for SimplyTapp and ModoPayments. I am an Affiliate Analyst for Yankee Group focused on Mobile Marketing and Commerce Strategies. Previously I founded DROP Labs, a mobile payments/commerce strategy and advisory practice focused on banking & retail. Tweets here. I'm on LinkedIn here.
Cherian Abraham
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  • http://twitter.com/broadlycurious David True

    Typically good analysis, Cherian–you highlight all the challenge of the existing NFC model with example from your experience.  And all of those challenges are fenced by the implicit assumption that today’s NFC is the way mobile payments will ultimately happen.

    That limits you, when there are several ways that payments & loyalty & offers may move to  mobile device, ways that don’t have some of NFC’s constraints.

    You hint at one, when you write Google “…could energize merchant adoption by offering an interchange free model…”. Yes, reliance of the legacy 4-party model is a huge handicap of NFC, both from technology (old rails) and merchant cost (interchange). There are players today with models that bypass both of these, and here would have been a good place to mention them.

    Your list of 12 needed next steps is spot on– and again, there are players outside of the 4-party model working on many of these elements (though I don’t know of anyone who puts all elements together). 

    And your inner 8-year-old sense of delight I share, having felt it in 7 years ago when I first was able to pay with NFC in local drugstores and, later, taxis.  I get that wonder now from other models, such as Square Case, where I pay simply by speaking my name.  

    Again, a good piece, but one that I think could have been stronger if you’d removed the fence and noted the other means for enabling mobile payments that may well have more success than NFC.

    • ted FiSKi

      interesting, I would be curious to know how authenticating a transaction via user speaking their name would translate to the current USA culture…I am sure there are some really great technologies out there that are just awesome…but when you talk about market adoption I think you could be missing the boat.  We are already talking about a cultural shift in the way people would know transactions…taking it to Star Trek 1 Million may leave most humans behind.  Just food for thought.  Great comments David True.

      -Ted Ski

  • Djlewis

    Seems like the BS that does show up for Citi payments will leave customers thinking WTF more toward Citi than Google. Won’t that be a pretty big incentive to Citi to finish the job — because that’s just what it looks like — unfinished.  Well, time will tell.

    • ted FiSKi

      Colorful.

  • Juan Carlos

    Great article Cherian. I’ d like to ask you a couple of question:

    1. I used to see Google wallet like an engagement and upgrading customer experience initiative to conquered off-line payments (that of course would allow Google to leverage its advertising core business), but now with this prepaid Google card and the growing android market share, is it maybe Google planning to become in a relevant card credit issuer (or even bank)? They also already know about our on-line behavior more than anybody else. The underbanked people could be a possible target. What do you think?

    2. you mentioned the interchange fees. Don’t you think that Google Wallet stays too much at the front end of the model (customer experience) and board little (or nothing) backwards  to the aged e-payment value chain. I mean those are the same all ever guys, nobody has been disintermediated, like this it is hard to believe that for example merchants discount fees, operational fees or cash cycle settlements could change. Factors that are key nowadays especially for SMEs e-payment adoption in several countries.  

    Thanks for your answers, hope you go on publishing this kind of staff and wish you Happy New Year!!

    JC

    • Anonymous

      JC, Agree with you on both. On whether Google will ultimately decide its more trouble than its worth and opt for choosing a free or reduced interchange fee environment for merchants, to drive adoption of GW at the point of sale, its likely. But it also requires Google to stop playing second fiddle and act as a disruptor. In that role (as a disruptor) it almost seems that Square and Paypal knows to hold no punches than Google. Google it seems has not shown that it wants to be a payment company, and therefore is more amenable to growing its advertising share by turning its back on spurring any potential innovation in the payments space. Sad.

      The very reason Acquirers and issuers embrace NFC based wallets is because it allows them to keep the way things are – including current interchange fee environments. Google by leveraging off of it lost a chance to improve things for merchants, and subsequently customers (as in the case of Citi holding back merchant information)

      • ted FiSKi

        Hi JC and Cherian,

        I think Google really did not have a legitimate choice in the matter, at least right now.  Google does not want to become a bank…but they may think about it if that gets them to their ad revenue.  But that will be a very interesting situation if they do become a bank….or buy a bank which is more likely.

        And yes NFC wallets are a great way to keep the current payment powers powerful…at least for now.  But even with new technology I think the major payment players would rather easily acquire new and budding technology, using it to their advantage or boxing it up forever.

  • יוסי רוזנר

    Hi Cherian, the article is very interesting. Thank you.
    you wrote that “The payment rails that Google Wallet runs on, is several decades old” can you explain more please?

    • Anonymous

      What I meant is the framework Google Wallet relies on to process transactions are still owned by others – First Data, MC, Citi etc that has been in place since Credit Cards became the standard choice of payment. Google Wallet relies on that existing infrastructure and therefore are bound by limitations imposed by that archaic framework and in some cases that prevent it from reaching too far.

  • Mobile Payments guy

    Great Observation Cherian. Thanks.  I agree with you that using the prepaid card is the most convenient method at this point. However, i’d like to point out that the prepaid card solution is unsustainable for Google. When you move money from your BOA credit card to the prepaid card, the ‘merchant’  has to pay interchange to BOA. Who is the merchant here, i’m not sure. Most likely Google. When the prepaid card is used, the interchange received is much lower (about 0.8% lower) b/c it is a prepaid card. Once and if Google enables P2P, interchange will not be Durbin exempt, dropping the interchange to 21 cents flat. So while you enjoy loading your prepaid card from your credit card, Google (most likely) is taking an interchange hit. How long can they do this? probably not long, especially if more people start using the wallet. 
    And eliminating interchange? you would have to use ACH to do that…. No issuer of cards will give up their interchange but still give out credit. That’s the business they are in….

    Thanks

    • Anonymous

      Eran, Thanks for commenting. I believe Google is focused beyond any interchange revenue it will make if it decides to go the Prepaid route. Which is why with GW, it does not share in on the interchange pie. Durbin pretty much took about $9B off of the table annually reducing the size of the pie, and more over, new revenue streams from leveraging the payment context will allow Google to exponentially increase their ad revenue. If Google (or any other player) intends to disrupt the payments space, they need to lay the axe to the root of the current interchange structure.

      There are larger shifts afoot here. You hint at it by mentioning ACH. Do we truly need a credit source every time we pay at retail? Initially mobile payments were proposed to replace cash transactions, which tend to be low dollar, and which could really be funded via ACH. That could be another manner in which merchant adoption can be spurred, with free or a reduced interchange.

      • ted FiSKi

        Yes a fee reduction to the merchant is something that maybe interesting to them but i think the ability to build a stronger more lasting relationship with customers is much more tantalizing to the merchants.  I am not sure if they would jump on board with just fee reduction on the table….i mean they have been coping with it thus far.   But ACH be coming into focus on the horizon in the near future…..if that is the case we will need to take a serious look at banking software and infrastructures….could get dicy.

    • ted FiSKi

      mobile payments guy.  I would agree from the business side of things.  However, being unaware of the relationship between MC and Google. or BA and Google…the fees may or may not be present….we have to remember Google has to keeps its 30 billion in invest able assets and cash some place?  But very good point, messing with the cash cow is a sticky situation.

  • http://www.trishburgess.com Trish Burgess-Curran

    I fully agree with you when you say that Google Wallet, and all future ewallets, need to enhance our current payment experience with useful services – the 12 you list are very good examples.  Google Wallet cannot just mean substituting a credit card with a phone, that is just using a different payment medium.  It needs to be a quantitative improvement in the discovery, payment and servicing experience.  If you have to search for the appropriate coupon to use at the point-of-sale, if the ewallet doesn’t help you manage your overall expenses and/or choose the best method of payment, it is not really fulfilling its potential.    Having said this, it is a bit of a chicken and egg situation.  First of all, Google is well known for launching half-baked products / services and use the knowledge gained through early adopters to help them determine the value of the product / service and how best to shape it.  Google Wallet sounds a bit like one of those products / services, in spite of the major effort made by Google to promote the solution with consumers and partners.  Time and user uptake will ultimately determine how much Google invests in improving the wallet, whether improving it means additional investment in technology and integration or additional pressure on its partners.  At the same time, because electronic payments (just pure payments) is not a new service, it could very well be that users need to see a fully implemented and well integrated product that adds real value before they start converting.  Coolness effect will only take the ewallet so far…   In any case, I am really surprised to hear (I have no direct experience with Google Wallet) that the coupons / offers are not better linked to purchases and payments…  I understand the limitation with Citi MC if Citi is not sharing information but at least to link the offers with Google’s pre-paid card.  Why do you think they have not already done that?  To be honest, the way it stands now, I cannot envision Isis taking this leadership role.  I think there needs to be a trusted leader that integrates all the services and information for the benefit of the customer while getting all partners around the table to agree and play together.  Apple has managed to do this in the past with the record labels…  Could this be another similar opportunity – with credit card companies and banks, just like record labels in the past, knowing they need to jump into mobile payments, or into online music sales back in the day, but not knowing how best to do it – ripe for Apple to ‘save the day’?  Maybe Google just needs more time to build the case with Citi and other issuers?  Once a first ewallet is launched with all the capabilities and a clear business model is defined, other alternatives could be easily developed.  In any case, I agree with your point on branding.  A fully Google-branded wallet may appeal to users but it is unfair to Google’s partners and it highlights Google’s attempts to disintermediate them.  Not the best way to lead, build consensus or create trust and generate good will…  Having said this, the issuers can have great clout and leveraging power…  Why wouldn’t Citi or MC or, even better, both, demand more joint branding.  To be honest, if offers are not integrated with the pre-paid Google and MC cards, there isn’t much value-add that Google is bringing to the table yet…  Why wouldn’t Citi / MC be bolder?  This is the first ewallet initiative (at least the most advanced) but it is not the only one…  Google is not too big a giant for Citi and MC not to get their demands met.  Having said this, if Citi / MC are just trying to put in the minimum effort to be seen to play along but are actually working to keep the status quo, then this is the best hand they could play.  Your suggestion to readers to favor the pre-paid Google card could send the right message to Citi / MC but, and I am sure you agree, untill all the players are working together, we will not realize the full value of the wallet, which includes better managing our overall expenses and use the most convenient method of payment in each instance.  Also, I would like to use my ewallet to make all sorts of payments, small and large, at any point in time.  Pre-paid cards sound to me like a great solution for small and frequent purchases (like daily chai tea lattes at the local Starbucks) but not really suitable to cover all my shopping needs!  I do agree also with your comment to JC where you state that Google choosing NFC has favored the status-quo in payments (the actual payment processing part of the puzzle), which is one of the reasons why I am so interested in PayPal’s offer and cannot wait for them to launch it.  At the same time, many PayPal transactions also use ‘traditional payment’ rails – whether bank accounts or credit cards – so there should still be a number of more revolutionary options to payment innovation!  Just one more comment on Square…  In the comments you also include Square as an innovator in the payments space.  I agree that it is a disruptive mobile POS that poses a clear threat to the First Datas or Verifones of this world but, from the perspective that it also uses traditional payment rails, it is not really helping to change the four-party network model.  Is it?  Am I missing the point?  This is a complex topic with many interesting and different points of view, which makes it very difficult to explain all the nuisances over a post / comments but, in any case, I hope my ramblings make some sense! 

  • http://www.facebook.com/doderlein Daniel Registrertvaremerke Död

    Thanks for sharing, Cherian. (unintended word play :)

    I think you are spot on, and your comment below on axing the interchange I believe is the only true path to salvation for any new payment scheme.

    At the end of the day most people in the developed world have their money in a bank account. Or they get credit from the same. The power of distribution from banks should not be undermined, but their lack of innovation (or unwillingness to untie the wings) can hurt that position in a way that might be beyond salvage.

    If we look back in time and remember how Visa, MasterCard and the other credit card players got their stronghold, it was through distribution provided by the banks. In lack of any solid infrastructure to access the money in your account, the credit card networks became the glue between your bank, the money in your account and the merchants. It replaced cash with more or less electronic payments, financed by the interchange (and the interest rate we paid on the credit). Merchants paid the bill as this was a great way to push sales.

    The driver of “easy access to money” has little appeal to merchants. Their customers has great access to money in a verity of flavours. The driver of “easy access to money” I believe has shifted to the User. We have a multitude of ways to pay, what we want is the simplest access to money we have, or credit we accept to use. Pre-paid is obviously not the right path. Why would you take money you have in one place and move it to another place to make it easy accessible? History has proven time after time that pre-paid is not the way to go, and now the leader in pre-paid (PayPal) has proven this by bedding with what ever bank that wants to play.

    I believe the bank is the key. Like when the credit cards got their stronghold, any new (and in my mind) mobile payment scheme should be issued by your bank. It should be directly connected with your account, and your bank could issue credit on that same account or set up a separate account for this. Just like they do with your credit cards, except there is no cards. Why would the banks do this?

    Because the banks “own” the customer. If they wanted to issue a payment tool, connected to your account with them, they could. Just like they issue debit cards, internet banking etc.

    By skipping the credit card networks they could make the famous “rectangle” (merchant, issuer, acquirer and network) into a triangle (merchant, issuer, network) where the network would play the part of both acquirer and network operator. This would enable an extremely competitive interchange fee on credit payments, and a network for debit payments without any interchange. The banks could bank virtualy the same revenue as before (not taking into account the reduced cost of issuing a pure digital payment service, compared to issuing cards) while offering true groundbreaking payment schemes to their customers. Oh and one more thing.. The bank would keep their close relation to their customers. It would have their brand on it, just like a debit card. No branding of visa or mastercard, just your bank.

    With the SEPA initiative it is clear that our world will see more and more efficient clearing and settlement systems that operates beyond borders, real time and without interchange playing any role. The credit networks are dying, thus investing money “everywhere” to look smart, keep their position and break anything that undermines their role.

    At the end of the day I believe that the banks can choose to push a scheme that is direclt connected to the bank accounts they host. You will be able to bring your phone to a merchant and perform a debit (or credit) transaction from the POS, that is instantly cleared towards your selected account. The network would operate without any interchange and rather leverage the transaction data and small fixed transaction ticker fees to generate the Value Added Services that both merchants, banks and end-users are asking for (like you said; the balance of my account real time, the options to choose a different funding source because I will benefit more, automatically select the proper coupon etc).

    First Q 2012 Norway will get this and its called mCASH. We are also setting up shop in San Fransisco Feb / March, I would love to offer you a sneak peek and beta access.

    • JC

      Hi Daniel,
      I agree with your point of the need to disrupt the actual e-payment ecosystem, otherwise it is just front-end make up. But coming from a bank, I am not fully convinced about banks leading the m-payments. From indoors I used to see them more like “let’s wait and see what happens”. Although payments methods are by excellence the key engagement media for relational marketing, m-payment is not the top priority in their strategy.
      Another point for the triangle you propose is the interest conflict that banks could have kicking out strategic stakeholders like Visa and MC. The credit card product is the most profitable for the banks in the current state, so why to risk this?
      Finally to build up a new parallel payment ecosystem, although it is possible, implies big challenges in investment and op costs, connsidering that at the same time you want to reduce or even better eliminate fees. As far as I know PayPal charges a fee for using their virtual payment infrastructure, now imagine if what you want to deploy is a physical network.
      I bet that banks just will wait and see what happens, to choose then for what will impact least their current fat margin credit card business.
      Regards
      JC

    • ted FiSKi

      Interesting thoughts?  I have a few comments;  1) Can you really compare Norway to the USA…or even the Bay Area? 2)  How does this system circumvent the current merchant payment acceptance network of Visa/MC? 3) How does it provide a more efficient form of payment for consumers without simply transferring money into a quasi-debit payment system riding next to the banking infrastructure? 4) How does the new system offer consumers aka you and I a better system of payment?

      Just curious and hope it is not the FaceCash idea…that is kinda electric cars right now great idea.  unpractical execution.

  • george

    Well said. Just one general observation. Everytime I see someone using a credit card in front of the queue I
    think – expletive deleted.  Delays. It isnt the processing time so much as the
    useless customer – e.g.goose waits until the bill is ready and then
    opens their  bag and tries to find a card holder in the black hole of Calcutta – and them
    work out which card – and so on. Then so many of them will carefully put
    away the card, file the receipt before racking off.  Now a smart phone
    “tap and away.” should be quicker. Hell no – once they’ve found the
    frigging  phone in their bag they’ll have to turn it on (saving power….) – or  “power up”   – then search for their glasses so they can stop tapping a candy display on the counter. The savvy young creature tap dancing through the checkout – “as shown on TV” – aint reality.   Its time someone invented a faster and securer and cheaper system for merchants.
    I have name for it – CASH – just need to work on the technology side, find investors. Could be a hard sell.

    • Mobile Payments guy

      George, if people in the US were not afraid of it, there is a much better solution than CASH. Biometric reading. a quick swipe of the thumb and retina scan is all that would be needed. And you never run out nor forget your eye/fingers at home. It will come eventually but not in the next 20 years. What kills me is that people don’t understand that with a mobile phone, we know where you are, what you buy, what you looked at, how fast you are going, whether you were naughty or nice and so much more. It’s all psychological…

      • ted FiSKi

        I am commenting all posts i see and this is a good one.  yes this may be true….if so just switch to an aftermarket firmware or perhaps users will walk up and realize they MacDees, the Fed and their friendly Congressman may not be looking out for their customer best interest but their own.  If that happens, their will be plenty of wonderful changes to the general psychological make up of society….but yes I agree….you will have a had time leaving your finger prints at home.

    • ted FiSKi

      lol well, George…got to hand it to you….

  • Anonymous

    Great info–thanks for sharing!  The nuance of putting the tech-savvy, efficiency-minded, rewards-monetizing consumer in charge of the payment/check-out experience is a big consumer adoption factor, which you can also see with the popularity of the Starbucks barcode mobile payment system.  While clerks are often more informed and literate in Starbucks stores, most of those working in off-premises Starbucks locations are just as oblivious to more sophisticated check-out services and preferences as the average retail clerk.  (Ironically, those locations tend NOT to accept the new payment services…). Integrated, intelligent mobile payments systems will empower consumers to overcome poor training, motivation, and customer-handling skills at the point of checkout.
    I think Google, and probably Citi, get that, but they are hamstrung by the consistently dumb way NFC has initially been implemented for mobile POS.  Consistent with everything the legacy payment brands (Visa, MC, etc.) do, technology efficiencies (such as serious information exchange) and security get dumbed-down to the lowest common denominator (usually old bank back-end systems…)–confounding the ability to streamline the check-out process while adding int the real-time marketing redemption and other goodies that most consumers want.So the real solution for mobile wallets might be to quit focusing on building the NFC paradigm around legacy payment products and processes, and exploiting the substantially greater efficiencies (and security) that can be obtained from cloud-based services–many of which can be lit up at the same POS terminals that run NFC, but with different access channels and interfaces.  That’s how we can get to reasonably-priced and much safer payment options, with more ingratiating–but more secure and private-marketing information exchanges1Otherwise, it will be years and years before all the clunky, old payment back-end systems can do anything substantive (like your 12 points) that mobile technology can provide–and by then, Visa and others will have burdened the emerging system with all the rules and rate baggage from last century’s plastic card paradigm….
    That’s why it is SO VERY IMPORTANT for EVERYONE ELSE in the mobile transacting ecosystem work together to ensure that the 20th century payment philistines don’t wind up controlling digital payments and marketing.  

  • http://twitter.com/TimesRGud Salil Ravindran

    Thanks Cherian. Was looking forward to someone sharing a detailed first hand account of GW.

    Looks like after all the fanfare 4-5 months old now, wallets are going pear shaped. I had another kind of experience but it all points to the same flaws eventually. Blogged here

    http://finextra.com/community/FullBlog.aspx?blogid=6099 

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  • JM

    “It seems that Citi, the only issuer backing Google Wallet, opted NOT to share merchant and paid information with Google in the first large scale, tangible mobile payment initiative in history.”

    I am very thankful that Citi opted not to share this personal information about where I am purchasing goods with a company that derives 99% of it’s income from selling online advertising.  It seems to me that Google would love to get ahold of where users were spending their money.  Knowing where people spend their money after viewing ads would be a very powerful thing for an advertising company and at the same time very bad for the consumer.  Many in the payments industry would say, “But then we can give you targeted offers and one million points!”  I don’t carry arcade tokens in my wallet and I don’t want any of your tickets that can be redeemed at the gift shop for novelties.

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  • ttorris

    Great article

  • Ravi

    Cherian, very interesting thoughts and practical. As this space is more evolving and this is the first practical stab by all the players, still a long way to go.
    At this point looks like the focus is to see how all things put together works and what the customer thinks about it.
    Imagine….if Citi were to share all the merchant data with Google, i m sure some section of the people would not be very happy from security and privacy stand point.
    With increasing adoption and convenience(loyalty coupons, targetted offers)  perception would surely change driving changes, believe me its just a matter of time when more banks would come up and competition grows

    Ravi

    • Anonymous

      Ravi,

      I doubt if concerns around security and privacy were why Citi opted not to share merchant information, especially when only I could view my wallet information. Ofcourse part of the blame lies with Google for not building a sandboxed environment for Citi and its other Wallet partners where they could pass thru merchant information so that it could be viewed by the consumer, where the same Citi and others could be sure that Google would not be privy to the same information. And Citi could have opted to provide merchant aggregate information to Google so that Google could use it to recommend new and relevant retail experiences to the consumer, working alongside Citi. As long as the mistrust remains pervasive within these partnerships, we will see dumb moves like these.

      But, thank you for providing your perspective. 

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  • http://twitter.com/mordyk Mordy Kaplinsky

    I didn’t know
    about the Citi deal not sharing the merchant name tough I should
    have known they’d pull some harebrained move. Otherwise the points you are
    making reflect my thinking when we went about designing our wallet, so you’re
    kinda preaching to the choir and I don’t know what more to
    add.

    You did touch
    on an interesting point which if you’ve been following PayPal’s progress will
    only enhance your point. The grafting of mobile wallets to the existing rails
    without any modifications has inherently limited the abilities to what the rails
    are capable of, reflecting in the actual information in the purchase and
    real-time vs. batch as examples though the same applies to rewards, points, etc.
    Paypal’s model of disintermediating the existing rails allows it
    the freedom to deal with the issues you addressed and is frankly a better
    product example in terms of its capabilities, though not without its own set of
    limitations.

    An example of
    some of the limitations in Paypal’s model is that by PayPal being
    the actual payment method, it does not have the dynamic choice and balance
    abilities you discussed due to its very nature.

    The entire NFC
    model has been developed as a patch to the system and not a reinvention hence
    its limitations. On the other hand if you want to go about creating a system
    from scratch you face the challenge of getting enough merchants onboard, which
    is the reason that we at Fonwallet have chosen a hybrid approach
    that combines the strength of the current rails while adding additional
    capabilities.

  • BrunoP

    Thanks for the very rich feedback on GW.

    2 comments :

    – how could Google offer an interchange free model ? Current implementation relies on the 4-corner model, where Google is just an issuer (or Google’s partner bank, doesn’t matter) : merchant fees are applied by the merchant acquiring bank (not under Google’s control), then interchange is applied following the payment scheme rules (not under Google’s control).
    The only way would be to build a 3-corner like model, such as Paypal on the web or Amex. But that requires a) to roll-out acceptance infrastructure (either pure software and/or hardware) at merchants and b) to sign acquiring contracts with those merchants. 8M POS in the US I heard, that’s a pretty big amount of merchants to visit, even for Google.

    – more importantly : HOW DID YOU MANAGE TO INSTALL GW on your Galaxy Nexus ??? Yes, getting and installing the .APK is very easy. But how did your GW app access the phone’s secure element ? how did it get the keys that only Verizon (or Samsung or NXP) should have kept secret ??? It sounds like Google somehow “hacked” your phone’s secure element, and that’s really a major issue…

    Regards,
    Bruno