2012 Does Not Bode Well for Google Wallet with Present Strategy

Suggested New Year’s Resolution for Google: “Must Find a New Wallet Strategy.

2012 does not bode well for the Google Wallet, especially if Google sticks with its current strategy for its NFC-enabled mobile wallet.

That strategy does not appear to be working, with use of Google’s wallet low, its reach small and–most importantly–its prospects to scale up difficult, given its current ecosystem requirements.

Of immediate concern for Google is its inability to get its wallet onto more NFC phones–including its own Galaxy Nexus Android model, released last week by Verizon Wireless.

Verizon is doing its best to block the wallet from the phone, and Google might not fare any better with the other telco partners in the Isis joint venture. Isis plans its own NFC mobile wallet.

The Web giant is also getting a cold reception overseas from large operators, which have their own NFC wallet plans.

So Google has to rely on Sprint, the No. 3 U.S. carrier, and smaller operators elsewhere to support its wallet or try to go around the big telcos. The latter option would be hard to do in the U.S., since telcos buy the phones and control the distribution channels. Therefore, they could insist on owning the keys to all of the secure elements in NFC phones that Google needs for its major wallet applications.

This kind of fragmentation does not augur well for Google getting its wallet into the hands of enough consumers to make a difference.

Another alternative for Google is to force Verizon and the other Isis telcos to support its wallet. I’ve heard the Web giant is considering legal options. Moreover, Google, while facing its own antitrust scrutiny for other parts of its business, could try to get authorities involved in regulating the wallet wars.

Of course, Google also could try to negotiate a settlement with the telcos.

But access to the secure elements in NFC phones is not the only problem Google faces. There are other major concerns. Among them is getting more issuers and merchants onboard.

The lone bank to make its support for the Google Wallet known remains Citigroup, and the chief architect of Citi’s involvement, Dickson Chu, Citi’s managing director for digital networks in the bank’s global enterprise payments unit, didn’t stick around too long to see how the wallet–launched in September–would fare. He left recently for daily deal site LivingSocial.

As NFC Times has reported, three other major banks, JPMorgan Chase, Capital One and U.S. Bank, are expected to align with Isis. They rejected earlier recruitment efforts by Google, though at least one, CapOne, was close to signing on with the Web giant.

CapOne or one of the other banks might end up backing out of Isis, which is having its own problems preparing its platform for its scheduled mid-2012 launch in two U.S. cities, NFC Times has learned. And the issuers could always join Google later, as well as any of the other mobile wallets gearing up for launch.

But there is a reason they chose Isis first, even though the Isis wallet hasn’t launched yet and the JV plans to charge fees to the banks to use the platform, as opposed to Google, which is offering space in its wallet to payment issuers for free.

It’s more than just the much greater reach that Isis promises to offer, with up to six major handset makers pledging models that will support the yet-to-surface Isis specs and the three Isis operators owning a 76% share of the U.S. cellular market.

As one U.S. payment industry executive put it to me: “It’s not as if all the banks love Isis and the telcos; it’s just that they hate Google more.”

Hate might not be the right word here. Fear is better–fear of the unknown, that is. It’s the same for merchants, who find it difficult to trust Google’s assurances that the Web giant will protect their customer data and not use it for its own advertising business and offers.

But that isn’t the only thing that explains the apparent snub of Google by big U.S. banks.

Perhaps a clash of cultures was inevitable, but I’m hearing from sources within the financial services industry that the Google Wallet team just doesn’t speak the same language. The financial types use words such as “cocky” and “inexperienced,” even “arrogant,” to describe the Silicon Valley-nurtured Google Wallet executives and managers.

The Isis telcos, though starting out challenging the entrenched payments industry interests by planning their own brand, backed off the idea and expressed sufficient contrition to apparently win back banks and established payment networks. Isis also hired a financial industry veteran, Michael Abbott, to lead the JV.

Of course, it’s only been a little more than three months since Google officially launched its wallet. And one could argue that to usher in the new era of mobile commerce that smartphones combined with NFC technology promises, a different approach is needed–one that a so-called “over-the-top” player like Google is best placed to deliver.

Still, facts on the ground are not shaping up well for the Google Wallet, and unless Google makes adjustments, the wallet could go the way of the other bright ideas and experiments from the Web giant that didn’t quite make it in the market.

Article comments

omnipotent1824 Jun 24 2012

I have read that Google wallet had some problems with security.
Did they already try if the issues were already fixed?
Thank you for sharing this article.

My blog : frein moteur 

stevebeec Jan 30 2012

I am currently working for clients that have an existing relationship with Isis and with Google and I agree with many of your comments but here are my Observations.

Citi jumped ship after significant investment into preparing for the Isis Wallet
Isis is Verizon, T-Mobile and AT&T, given this is Verizon's position to the Google Wallet on the Galaxy Nexus situation anti-competitive?
Google has a GLOBAL reach can Isis claim the same.
Neither Isis nor Google appreciate the legal complexities of providing a Financial Service and in my view are too naive to succeed without first recruiting significant experience in Payment Cards on every level.

Heres the thing.......................

- Issuers provide the cards (and applets for mobile) to the customer and are trusted by them to do so.... term used loosely.

- Acquirers provide the link from the merchant to the payment scheme / network.

- Payment Scheme / Networks process the Transaction from the Merchant / Processor through to the Issuer

- Merchants will provide the Goods and Services for redemption of Coupons. Vouchers etc

- MNO's have the wrong relationship with the customer i.e. they provide comms capability where the financial transaction is direct with the end user.

- MNOs have no relationship with Merchants

- A Mobile Contactless (NFC) transaction does not use the mobile network in any way!

So Playing Devils Advocate................. what exactly is the role of the MNO????? ........... Wallet Provider????? thats not exactly what I would call a secure position in this particular ecosystem



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