Google’s NFC Wallet Predicament

Even as Google sends out its “brand ambassadors” to catch video images of consumers gushing as they tap to pay for the first time with the Google Wallet, doubts are growing that the Web giant will be able to make this a mass-market service.

Google’s announcement last week in Hong Kong of its much-anticipated Galaxy Nexus smartphone came with extra promotion for NFC-based “Android Beam,” a feature that is essentially a tweaked version of the interface for enabling users to transfer Web links with NFC’s peer-to-peer mode.

But there wasn’t a word on how the phone could be used for the wallet.

A source tells me that U.S. mobile operator Verizon Wireless, which announced Friday it will sell the high-end Galaxy Nexus, is balking at supporting the wallet. Verizon, the largest member of the Isis joint venture, has its own plans for NFC wallets and they apparently don’t include Google.

A Google Wallet spokesman finally got back to me to say that, yes, the Galaxy Nexus “can” support the wallet. That was expected, because the phone almost certainly carries an embedded secure chip and the NFC middleware and application-programming interface to support the wallet. But the spokesman added that he could not “elaborate on details on the consumer release” of the phone, either in the U.S. or overseas.

Google Remains Mum on Galaxy Nexus and Wallet
Google’s conspicuous silence on its wallet when talking about the Galaxy Nexus says much about the challenges the Web giant faces in gaining widespread deployment of the wallet app along with its Google Offers service–the lynchpin of its business case for the wallet.

To date, the only model that supports the wallet is the predecessor to the Galaxy Nexus, the Nexus S 4G, sold through the sole mobile carrier that is not part of the Isis consortium, Sprint.

It would be difficult for Verizon or any telco to block the Google Wallet on Google's own phone and the embedded chips that Google supposedly owns. But it is possible.

And if it’s true that Verizon is enabling Android Beam on the Galaxy Nexus but not the Google Wallet, then Google is in a tight spot. If it can’t even enable consumers to download its wallet app to its own phone, how can it hope to have a range of other NFC wallet phones available for consumers?

As I’ve mentioned before, Google’s problem is that it needs control or at least access to at least one of the secure elements in the NFC phones where its wallet resides. That’s true for both payment applications and for coupons and other offers. Payment applications need to be kept safe on the secure chips. And the coupons or vouchers need to be on those same chips in order to enable consumers to redeem them in the same tap as the payment.

But in the U.S., mobile carriers subsidize and largely control the distribution channels for phones and could block access to the secure element by taking over ownership of embedded chips in NFC phones. This might be what Verizon plans to do.

Google has also agreed to anchor its wallet to SIM cards, if necessary, another potential secure element in NFC phones. But here mobile operators wield even more control than they do with embedded chips, since they issue the SIMs.

In Europe, where telcos are insisting that secure applications be stored on SIMs, Google is getting an equally frosty reception as it attempts to launch its wallet overseas next year.

The European carriers are closing ranks, with plans to form their own joint ventures, in part to keep new players like Google out. The telcos, just like those in the U.S., are determined not to get cut out of the revenue from NFC applications running on their phones the way they have missed out on most of the money from the smartphone app stores.

And with NFC, telcos have an edge they don’t enjoy with purely phone-based apps. In most cases, they could control the secure element, which is necessary to store for what most believe will eventually become the premier revenue-producing applications for NFC technology–payment, ticketing and ID. These types of applications generally have cryptographic keys that need to be kept on a tamper-resistant chip, which is what the secure element is.

Of course, the telcos are insisting to the ecosystem–and where appropriate, government regulators–that their NFC platforms are open. But if Verizon is, in fact, blocking Google from using the secure element on its own NFC phone–and we’re not sure of that yet–it would be hard for Isis to continue to make the statement that its NFC platform is open.

Google’s Bedier: Blocking Not a Winning Strategy
Osama Bedier, Google’s point man for its wallet, told NFC Times he wants to take the Isis carriers at their word that they would work with Google and its wallet.

“I can't speak for those carriers, but it is not a winning strategy to try to block access anymore, although it may buy you a bit of time,” Bedier said, speaking early last week, before the Galaxy Nexus launch. “They may try it, but it won't last, and I hear from the carriers that they want to be open.”

Isis declined to comment on any support or lack thereof its member operators might give to Google. And Verizon did not respond to requests for comment.

The Isis telcos, which buy phones in the millions, are expected to have a much easier time than Google sourcing NFC models that can run their Isis wallets, when the telcos plan to launch next year. The joint venture announced last month that six major handset makers, Samsung Electronics, LG Electronics, HTC, Research in Motion, Motorola Mobility and Sony Ericsson, plan to introduce NFC standard phones that could support Isis.

Even if Google were to get its wallet distributed on a variety of devices, this could create its own problems. It would need to manage keys to a variety of secure elements, both embedded and on SIMs, from different owners, such as handset makers and mobile operators.

Update: Google Control of Android APIs
Of course, other potential rivals to Google have pointed out the search giant has not published application-programming interfaces, or APIs, to the wallet or to access secure elements in the Android phones.

These unpublished APIs would technically enable Google to block access to secure elements for other wallet providers in its own Android phones and potentially others, though it would be difficult for Google to deny Android device makers access to secure elements in the Android phones they manufacture.

The APIs to access secure elements are not generally published by other platform providers, such as Research in Motion for its BlackBerry OS. A Google spokesman told NFC Times that “for security reasons, we do not plan to publish APIs to control the secure element in the Nexus S.” It's unclear whether that restriction will extend to other Google Android phones. The spokesman added: “Google Wallet is an open commerce ecosystem and we will work with any bank, carrier, network to include them in Google Wallet.”

Still, the fact the APIs are not published is enough to raise suspicions among organizations that could compete with Google on mobile-commerce platforms, including mobile operators that plan their own NFC wallets and such companies as American Express. There might be other restrictions, as well, they suggest. End update.

Wallet Merchants: About Two Dozen and Counting
Meanwhile, besides needing more phone models that can run its wallet, Google also needs merchants to accept the coupons and other offers stored in the wallet app.

When it unveiled the wallet May 26, it announced an impressive lineup of about 20 merchant partners, including some major names in U.S. retailing, such as the largest drugstore merchant, Walgreens; the largest fast-food chain in terms of outlets, Subway; and merchants in retail categories that hadn’t accepted contactless payment before, such as Toys “R” Us and Macy’s department stores.

But five months later, Google has only announced a handful of small chains, such as regional supermarkets and a frozen yogurt chain.

Of course, the Citigroup-issued credit card and Google Prepaid Card in the wallet can be tapped to pay anywhere MasterCard PayPass is already accepted–which is roughly 150,000 locations stateside–but Google needs more than contactless-payment terminals. It needs the terminals to also accept coupons and other offers.

As it ramps up its promotion, following the wallet’s Sept. 19 official launch, Google last week announced that eight chains, which include clothing retailer American Eagle Outfitters, Macy’s and Toys“R”Us, can accept both payment and coupons or loyalty points together.

Of course, Google only officially launched the wallet a little more than a month ago. But the SingleTap locations across the eight chains total only about 1,500 outlets so far. And they don’t accept true targeted, individualized offers, based on preferences, buying patterns and other opt-in criteria that Google has said is the vision for its wallet.

Some of the big-name Google Wallet merchants, such as Subway, will be rolling out new terminals that only accept payment, at least for the time being. “Offers” will have to wait. And Subway’s franchisees apparently have such disparate POS systems, only about 30% of its locations will get the payment terminals for now.

Bedier told us that not all Google Wallet merchants have been announced, and recruitment efforts are going "phenomenally well" and “everyday there is someone new who wants to jump onboard.”

This appears to be a bit of a stretch–just as Google’s announcement last Wednesday that it had signed up its first transit partner for the wallet, New Jersey Transit.

Sure, customers can tap their Nexus S 4G phones to ride on some NJ Transit trains and buses, but they are doing nothing more than using PayPass, mostly to buy paper tickets from vending machines or ticket windows, which they will insert into low-end turnstiles at train stations. There are no digital tickets or related NFC services, such as tag reading to get transit schedules, involved.

It is similar to tapping a PayPass or Visa payWave contactless card to make a purchase in a store. And we all know that tapping instead of swiping cards this has not exactly captured the imagination of consumers.

The promise of NFC phones for contactless commerce is its ability to deliver offers and interactivity. That is what Google is aiming for.

But if it can’t overcome its many challenges, soon the novelty of tapping phones to pay will wear off, and it will be harder to find gushing consumers for the Google Wallet videos.

Article comments

Victoria369 Mar 24 2012

For me it is a no doubts that the growing Web giant will be able to make this a mas market service I certainly believe on that! I am use of Samsung net phone and until I really can't believe how they become successful on that market we should take note on that. It sort of a superb article content!


My blog : tunique grande taille 

Please register or login to post a comment.


Australian Transit Agency to Launch Mobility-as-a-Service Trial as It Pursues Long-Term MaaS Strategy

Plans by Transport for New South Wales, Australia’s largest transit agency, to launch a trial enabling users to plan, book and pay for multimodal rides is the next step toward the agency’s long-ter

Updated: U.S. Transit Agency Seeks to Reduce–Though Not Eliminate–Cash Acceptance with New Fare-Collection System

Updated: The Spokane Transit Authority in Washington state confirmed that its new fare-collection system will include contactless open-loop payments–with a beta test planned for next October, a spokesman told NFC Times' sister publication Mobility Payments.

UK Government Seeks to Bring London-Style Contactless Fare Payments System to Other Regions

The UK government’s plan to equip 700 rail stations over the next three years to accept contactless open-loop payments is a major initiative, as it seeks to replicate the success of London’s contactless pay-as-you go fare payments system elsewhere in the country–a goal that has proved elusive in the past.

More Cities in Finland Expected to Move to Open-Loop Fare Payments

A fourth city in Finland is beginning to roll out contactless open-loop payments, with “more in the pipeline,” according to one supplier on the project, making the Nordic country one of the latest hotspots for the technology.

Moscow Metro Expands Test of ‘Virtual Troika’ in Pays Wallets, as It Continues to Develop Digital-Payments Services

Moscow Metro is recruiting more users to test its “Virtual Troika” card in two NFC wallets, those supporting Google Pay and Samsung Pay, as one of the world’s largest subway operators continues to seek more ways for its customers to pay for rides.

Ohio Transit Agency Expects Significant Revenue Loss as it Builds Equity with Fare Capping

The Central Ohio Transit Authority, or COTA, officially launched its new digital-payments service Monday, including a fare-capping feature that the agency estimates will cost it $1.8 million per year in lost fare revenue, the agency confirmed to Mobility Payments.

Special Report: Interest Grows in ‘White-Label EMV’ for Closed-Loop Transit Cards

As more transit agencies introduce open-loop fare payments, interest is starting to grow in use of white-label EMV cards that agencies can issue in place of proprietary closed-loop cards for riders who don’t have bank cards or don’t want to use them to pay fares.

Swedish Transit Agency Launches Express Mode Feature for Apple Pay, though Most Ticketing Still with Barcode-Based App

Skånetrafiken, the transit agency serving one of Sweden’s largest counties, announced today it has expanded its contactless open-loop payments service to include the Express Mode feature for Apple Pay.

Major Bus Operators in Hong Kong Now Accepting Open-Loop Payments–Adding More Competition for Octopus

Two more bus operators in Hong Kong on Saturday launched acceptance of open-loop contactless fare payments, with both also accepting QR code-based mobile ticketing–as the near ubiquitous closed-loop Octopus card continues to see more competition.

Moscow Metro Launches Full Rollout of ‘Face Pay;’ Largest Biometric Payments Service of Its Kind

Touting it as the largest rollout of biometric payments in the world, Moscow Metro launched its high-profile “Face Pay” service Friday, as expected, and predicted that 10% to 15% would regularly us

Indonesian Capital Seeks to Expand to Multimodal Fare Collection and MaaS

Indonesia’s capital Jakarta, whose metropolitan area is home to more than 30 million people, is notorious for its stifling traffic congestion. In response, the government metro and light-rail networks and now it is funding an expansion of the fare-collection system to enable more multimodal payments and to build a mobility-as-a-service platform.

Exclusive: NFC Wallets Grow as Share of Contactless Fare Payments and Not Only Because of Covid

Transit agencies that have rolled out open-loop contactless payments are seeing growing use of NFC wallets to pay fares, as Covid-wary passengers see convenience in tapping their phones or wearables to pay.