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As Google Readies New Wallet Version, Sprint Gears Up with ‘Open’ Approach

As Google readies the launch of the next version of its wallet, expected to feature the addition of a physical payment card, other mobile-commerce players, including Google Wallet partner Sprint, are gearing up with their own offers.

As NFC Times reported last month, Google plans to issue a plastic card that can be accepted on the Discover Financial Services network, potentially adding about 7 million more acceptance points for its wallet. A Google source told NFC Times that Google is also preparing an app to run on the iPhone, which would require approval from Apple, and is planning a greater role for offers.

The new wallet version, 2.0, is due out this month. But the search giant was originally supposed to introduce it at an event last month. so the launch might be delayed.

Meanwhile, No. 3 U.S. carrier Sprint continues to prepare for the launch of its own NFC offer, which would be a more open approach to mobile wallets than either Google or the Isis joint venture, NFC Times has learned.

Sprint would have its own wallet, to be called Touch, with secure applications anchored to an embedded chip in its NFC phones, sources said. NFC Times first reported on Sprint's planned wallet in June. 

But the telco does not plan to restrict access to the secure element, only to applications in its own wallet, the sources said.

“If Isis is mostly closed, Sprint could be mostly open,” a Sprint staffer told NFC Times.

Isis is the result of the joint venture formed by operators Verizon Wireless, AT&T Mobility and T-Mobile USA, which launched its long-awaited two-city trial nearly a month ago. Isis puts applications on SIM cards.

Sprint, on the other hand, while it would seek to earn revenue from access to its embedded chip—like Isis does for access to the telcos’ SIMs–could also earn revenue from other wallets, said sources.

“Any wallet can use the secure element; there are tools and procedures to follow, the trust of the secure element is maintained,” said a source involved in the preparation of the Sprint offer.

That offer might not be launched until early 2013. It had been planned to be introduced before the end of 2012. The delay is not believed to be related to the planned acquisition by Japan-based Softbank of 70% of Sprint, which is struggling against its much larger rivals, Verizon and AT&T.

Sprint had originally been part of the consortium that became JVL Ventures, the Isis joint venture.

Of course, Sprint would not allow just any applications onto its secure chip, but would grant access to more third- party developers than other major wallet providers, said sources.

And the planned Sprint offer is not necessarily bad news for Google.

Sprint, which is the main mobile operator partner for the Google Wallet, could allow Google to continue to anchor its NFC prepaid payment card to the telco’s secure element.

Under the concept, Sprint could enable Google to put its NFC application on the embedded chip in Android NFC phones sold by Sprint, on which consumers could download the Google Wallet app. This would potentially sit alongside Sprint’s own wallet and apps or wallets from banks and other service providers.

As NFC Times reported earlier, to manage the secure element, Sprint has hired as its trusted service manager U.S.-based startup Sequent, which recently acquired the software assets of the now defunct Vivotech.

MCX Remains Coy
Meanwhile, the merchant-led consortium MCX also continues to gear up, though at a slower pace. The group remains coy about a planned launch date for its mobile wallet.

The consortium, which includes such major U.S. retailers as Wal-Mart, Best Buy and Target, has hired wallet software provider C-SAM, and has been in discussions with trusted service managers, NFC Times has learned.

Sources said large U.S. acquirer and transaction processor First Data is playing a key role in the group, though MCX representatives declined to confirm that.

They also refused to say what technology or technologies they plan to use to enable consumers to make payments and collect and redeem coupons and loyalty points at the point of sale, leading some to believe an MCX wallet platform is unlikely to launch anytime soon.

But MCX is expected to support NFC along with other technologies, which could include QR codes, and geo-location, sources said.

The merchant group has said that among the goals for the wallet are reducing costs–which means lowering transaction fees and protecting customer data.

“What I see happening with these other wallets, they are trying to move upstream in the shopping experience,” Jamie Henry, senior director, payment services for Wal-Mart Stores, told NFC Times, apparently referring to Google and Isis, among others. “I don’t need third parties between me and my customer. The merchant data is their own individual data.”

Henry and Wal-Mart vice president and assistant treasurer Mike Cook are outspoken critics of the costs of the current U.S. card payments system, prompting observers to believe Wal-Mart is the sole driving force behind MCX. Cook and Henry reject that notion.

“Wal-Mart did not start MCX on our own,” Henry said. “We have a seat at the table like other owners.”

Neither he nor other MCX representatives would say how they plan to protect consumer data, which wallet providers and card issuers like Google could collect–with or without the permission of merchants–when consumers conduct transactions. They could also collect the data through other means, such as geo-location. And Google said it has deals with some merchants themselves to acquire data.

And it also remains to be seen how MCX plans to lower transaction fees with the new wallet. It has indicated it does not plan to launch its own payment scheme.

The Sprint and MCX initiatives are part of a nascent U.S. mobile-wallet landscape that appears likely to continue to fragment in its approach to wallet technology and business models.

Unlike mobile-wallet providers in Europe and to some extent, Asia, which are largely led by mobile operators and are pursuing the SIM-centric approach to mobile payment, U.S. wallet and payments players are taking different approaches in attempting to connect the mobile device to the physical point of sale.

That does not always involve NFC. For example, PayPal, at least for now, is taking a purely cloud-based approach. Others, such as Visa, are starting with digital wallets to aggregate account details for online payments only. Isis, like telcos outside of the U.S., is using SIM cards as secure elements.

Google to Draw on Physical Wallet for Version 2.0
Google’s wallet chief Osama Bedier was expected to announce details of Google Wallet 2.0 last month at the Money 2020 conference in Las Vegas, but said he would defer that announcement to this month. Google indicated that the unveiling would happen in mid-November, though a Google spokesman recently declined to specify a date.

NFC Times has learned that the new wallet, which will be Google’s third version of its wallet app, will continue to support NFC, according to sources. Like the wallet’s current version, known as Google Wallet 1.5, a Google prepaid card will be stored on an embedded secure element on NFC-enabled Google Wallet phones.

As with the current version, users would be able to tap to pay where MasterCard PayPass is accepted in the U.S., with the transaction immediately funded by cloud-based debit and credit cards that users load into the wallet. That’s something major payment networks, especially Visa, does not like, since it erodes its brand.

Google apparently doesn’t believe the roughly 200,000 PayPass locations in the U.S. are adequate and will add a plastic card, supporting Discover. Both Google and Discover have declined to confirm the move.

But more details have emerged about the Google Wallet card, with the leak of sample screen shots from the planned Google Wallet app.

The screen shots say users can swipe the physical Google Wallet card wherever major credit cards are accepted and the purchase will be charged to the default credit or debit card the consumer had loaded into the wallet.

That is similar to the funding model for the NFC-enabled application in Google’s current wallet, but users might not even need to open the wallet app. They just swipe the physical card and their default cloud-based funding card is charged.

As with the NFC-enabled wallet transactions, Google would be able to collect what it considers valuable transaction data when consumers swipe the Google Wallet card, including the time, date, place and amount of the purchase.

Google loses roughly 1% of the purchase amount on each NFC transaction, since it has to pay card-not present fees to fund the transaction, which are higher than fees it earns on the actual card-present purchase conducted with the NFC phone.

A payments industry source told NFC Times the Google deal with Discover is not exclusive. It is believed to be somewhat similar to a deal cut between PayPal and Discover, which is the No. 4 payment network in the U.S. and is hungry to run more transactions through its network.

The fact Google did not choose MasterCard–it’s payment network partner for the wallet from the beginning–indicates Discover gave the search giant a better deal–either lower fees, more flexible network rules, or both.

Meanwhile, Google would also integrate offers, couponing and related promotions to a greater extent, using its acquisition earlier this year of processor TxVia, said a Google source. Google already uses TxVia for the current wallet.

App for iPhone Likely
In addition, Google is applying to Apple for permission to make a Google Wallet app available in the Apple App Store. The app would be used for online transactions, said the Google source. The iPhone, of course, doesn't support NFC and even if it did, Google wouldn't have access to a secure element to store its prepaid card, needed to conduct in-store NFC transactions.

But the Google Wallet physical card presumably also could link to cloud-based debit and credit cards loaded by consumers into Google’s iPhone wallet app.

In a teaser for the next Google Wallet version on its Google Wallet Web site, the company asks prospective users what mobile device they use, showing illustrations of an iPhone and other smartphones, in addition to that of an Android phone.

Bedier last month, speaking in general about Google’s approach to the wallet, told NFC Times that “our goal is ubiquity, to be on every smartphone, every (device). Everyone who has a Google account, which is practically everyone, we want them to be able to use Google Wallet.”

Google has stored payment account details for years on its servers as part of its Google Checkout online payments service, which it later incorporated in its wallet.

The main goal of Google’s mobile-commerce team is to make the bridge to the physical point of sale, where the vast majority of commerce is conducted. As Bedier put it, Google is an “advertising company,” and it covets the advertising revenue it could make around the physical store purchases using its wallet and card.

Isis Launches; Transaction Activity Reported Light
Isis also plans to earn revenue from delivering coupons and offers, along with fees it charges banks to store their applications on its members’ SIM cards.

Isis launched a large trial nearly a month ago in Salt Lake City, Utah, and Austin, Texas, but the joint venture declines to reveal the number of users or transactions so far.

Mobile shops in the two cities told NFC Times customers are upgrading their SIMs, and a couple of sources said that together, the three telcos have issued SIMs to a few thousand users so far, though that is just a rough estimate.

But that figure seems to be borne out by calls to mobile shops. For example, a T-Mobile store in Austin reported that it had upgraded between 20 and 25 SIM cards during the first week after launch. And a T-Mobile store in downtown Salt Lake City said that about 50 customers had come into the store specifically to upgrade their SIM cards for Isis during the last two weeks.

(See story, Isis Trial Snapshot)

But the signups don’t seem to be translating into transactions yet, at least according to the merchants surveyed by NFC Times.

For example, the store manager for a Macy’s store in Salt Lake City said she hadn’t heard of any Isis transactions, despite the store having several terminals installed supporting SmartTap, which would enable customers to both pay and redeem offers or coupons in the same tap.

An employee at an Aéropostale location in Austin said that only one customer had paid with Isis, and the store has had Isis terminals in place since before the actual launch. Isis conducted beta testing before the Oct. 22 launch and a beta tester probably made the purchase.

At BookPeople in Austin, where the service had been in place some weeks before the launch announcement, co-owner Steve Bercu described customer use of Isis as “not continual; it’s occasional.” 

Problem with PayPass
Also, NFC Times has learned that Isis users trying to tap to pay with a MasterCard PayPass application at certain older contactless terminals–like those found in some McDonald’s restaurants–would not be able to communicate with the readers. But the problem has not apparently yielded any complaints from consumers so far.

Isis and the telcos have been promoting the service with commercials, billboards and other media and most backers expect awareness to build, helped by a more than doubling of available smartphones–from nine to 20 by the end of the year.

A successful trial would lead to a wider rollout in 2013. By that time, Isis would have more competition from a further revamped Google Wallet, Sprint’s Touch wallet and other wallets, using NFC, cloud-based technologies or a combination of the two.

 

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