Where is Google Wallet 2.0? And is Bedier Bound for MCX?

Anticipation was peaking when Osama Bedier, Google’s vice president of wallet and payments, stepped to the stage for his keynote at the Money 2020 conference in Las Vegas Oct. 22.

Organizers of the new conference and expo had let it be known that Google would be making a major product announcement. And Google itself was one of the two top sponsors of the well-attended event, so this was no guesswork on the part of organizers.

Bedier in his presentation and during a Q&A with an on-stage interlocutor gave Google’s familiar vision for mobile commerce, it’s positioning as an “advertising company,” its cloud-based wallet approach with an NFC component, as well as hints about what was to come with the next version of the Google Wallet, 2.0.

Google had even posted a Web page earlier that day to accept invitations for the new wallet. The page included a reference to plans to introduce a Google Wallet app for the iPhone.

But there was no unveiling of the Google Wallet 2.0, or any other major new product, by the search giant at Money 2020. Bedier, at the end of his keynote, would only say that Google was “putting the finishing touches” on the new wallet version, which he said would be coming “very soon.” The new wallet would be launched in the next month, he said.

It’s been two months since the conference, and Mountain View remains silent about the status of the new wallet. In response to a request for information from NFC Times, a Google spokesman this week said he could offer no updates yet on the launch.

MCX Recruiting in Mountain View?
Meanwhile, I’m hearing from a couple of credible sources that Bedier is up for the job as CEO of the MCX consortium, formed by some of the largest merchants in the U.S., including Wal-Mart, Target and Best Buy. The MCX merchants plan to introduce their own mobile wallet and mobile-commerce platform.

Bedier, who moved to Google just under two years ago from PayPal, has, at a minimum, been considered for the MCX CEO job, said the sources. He may well have been hired by MCX. We should know whether that is the case soon.

If MCX hires Google’s wallet chief, it would be an interesting choice, because the launch of Google Wallet is believed to be one of the driving forces behind the formation of MCX.

Ever since Google initially announced its planned wallet, in May of 2011, the big merchants have feared that Google would be collecting their customer data at the point of sale, then use it to send offers and other promotions to their competitors. Google has denied it would do this.

The merchants see their MCX wallet as a way to better protect their customer purchase data and, more importantly, to try to take more control over the payment system in order to reduce transaction fees.

They believe the time is right to do that as the mobile-payment era dawns, enabling the merchants to set payment rules and to gain more leverage with certain open-loop card issuers and smaller payment networks willing to negotiate lower fees. MCX members are also expected to accept more private-label and gift cards and ACH-based payments from the mobile wallet.

While the merchants have seen Bedier and Google as an adversary, he has true over-the-top credentials from his time with PayPal and Google. Merchants want to shake up the payment system, which they see as being controlled by Visa, MasterCard and the big banks. MCX has worked with large processor and acquirer First Data and also with mobile-wallet software provider C-SAM, NFC Times has learned.

But any recruitment by MCX of Bedier is not likely the reason for the delay in the launch of Google Wallet 2.0. In fact, he was trying to avoid the question of the launch date even during his presentation Oct. 22, which seems to indicate a problem had cropped up unexpectedly in the run-up to the event and that Bedier believed could be fixed in short order.

It’s fairly certain that the wallet hasn’t been delayed because of technical problems, given that the delay has continued for so long. Moreover, Google is not in the habit in the first place of preannouncing new versions of products and building them up before they are actually unveiled, so Bedier was probably confident the wallet would work technically before promising it.

Google-Discover Deal to Blame?
That has caused suspicion to fall on what is believed to be Google’s commercial agreement with Discover Financial Services to introduce a physical payment card, the Google Wallet card, to work with the next wallet app.

The controversial move calls for issuance of a magnetic-stripe card to Google Wallet users that would be accepted at Discover’s more than 7 million merchant locations in the U.S. As with the current version of the wallet–Google Wallet 1.5–consumers could load their favorite credit and debit cards into the wallet, with the cards stored on Google’s servers. These cloud-based cards would fund the actual purchase transactions at the physical point of sale.

But instead of having to look for a contactless point-of-sale terminal accepting a MasterCard’s prepaid PayPass application stored on the embedded chip in the Google Wallet phones–which is used for the actual purchase with the current version of the wallet–consumers could swipe the Google Wallet card at any merchant that accepts Discover. Discover estimates its acceptance network covers 95% of the card-accepting merchants in the U.S.

Under the plan for Google Wallet 2.0, consumers could continue to set any credit or debit card of their choosing loaded into the cloud-based wallet as their default funding source.

And just as before, Google would continue to lose money on interchange on each transaction, since it pays card-not-present rates for funding the purchases with the cloud-based cards. But the thinking is, by expanding the wallet’s reach to more merchants, Google could collect more purchase data, which it receives with each tap of the PayPass application and would get with each swipe of the Discover card. It would use this data to send consumers targeted promotions. Charging merchants or other advertisers for these promotions is Google’s business case for the wallet.

Neither Google nor Discover has confirmed the agreement for the Wallet card, but NFC Times corroborated it with several sources. And in early November,  sample screen shots from the planned Google Wallet app leaked. They showed the Google Wallet card, with the Discover Network brand visible on the back of the card. Google later removed the screen shots.

The agreement between Google and Discover to introduce a Google-branded card that uses Discover’s retail-acceptance rails is separate from a smaller deal the parties announced in August, saying that Discover had become the first major credit card company to adopt Google’s Save-to-Wallet API. This API enables Discover cardholders to easily save their cards as a funding source in the present Google Wallet app, version 1.5, from Discover’s Web site.

It remains to be seen whether the delay in the launch of Google Wallet 2.0 was caused by the deal between Google and Discover for the Wallet card breaking down.

In any case, the proposed plan likely took heat from other card schemes.

The cloud-based funding model Google has adopted, in which consumers pay for purchases at the point of sale with one brand, such as MasterCard and possibly Discover, and fund them with another, has drawn fire from Visa, in particular, which sees it as an erosion of its brand at the point of sale, NFC Times has learned.

Google unequivocally denies Visa sent it a cease-and-desist letter in the fall, trying to stop it from fronting NFC transactions with MasterCard PayPass while possibly funding them with a cloud-based Visa card, as NFC Times reported. On the contrary, contended Google, relations with Visa were fine. Visa also denied any dispute.

In any case, even if it wanted to, Visa probably couldn’t have stopped the deal between Google and Discover from going forward, however.

Google’s Wallet Woes
As for other possible reasons for the delay in Google Wallet 2.0, there’s always a chance that higher-ups at Google pulled the plug on parts of the new wallet version, after learning what they entailed–though it seems unlikely that Bedier and other wallet team members would have promoted the new wallet without getting buy-in first internally.

But the delay and talk of the departure of its wallet chief are yet more problems Google faces in getting its mobile wallet established.

While Google said consumer use doubled after it introduced its cloud-based version of the wallet last August, take-up is still believed to be very low. Google has added few new merchants that can accept payment along with coupons or offers in a single tap since it launched the first version of the wallet in September 2011.

Google also merged online and Google Play store payments into the wallet. But its goal with the wallet is to bridge the gap between the online and offline worlds and that is the reason it continues to tap NFC and has also proposed using legacy technology, such as magnetic-stripe payment cards.

To use NFC for its wallet, however, Google needs access to a secure element on the phones. Its main telco partner for the wallet, Sprint, is believed to have given Google exclusive use of the embedded chips in its phones only for a limited period, which is expiring or has expired.

As NFC Times has reported, Sprint is planning its own wallet, called Touch, but would rent space on the chip to other wallet providers, including Google, said sources.

Telcos making up the Isis consortium, Verizon Wireless, AT&T Mobility and T-Mobile USA, are expected to continue to discourage, if not block, Google from the secure elements in the NFC phones it sells–unless Isis and Google strike some type of deal to work together. They have talked in the past NFC Times has learned.

Meanwhile, Google’s efforts to expand its wallet to other countries appear to be going nowhere, despite talks the company has engaged in the UK, Japan and some other countries. Major operators there are rolling out their own NFC-enabled wallets and see little benefit in working with Google.

Bedier in the Q&A near the end of his keynote at Money 2020 acknowledged that overseas expansion would have to wait.

“We need to do it, but I also think we need to figure out wallets in general first,” Bedier said. “I think expanding the model we haven’t figured out completely yet is a bit early. We feel really good about the next few versions of the wallet. We’re getting a lot of good feedback in all of our tests.”

Still, it remains to be seen exactly when the next version of the wallet will be ready–and whether Bedier will be around to launch it.

Article comments

nixonparker Feb 19 2013

Yeah… still, it is showing the upcoming version of Google Wallet. Google Wallet app is supported to all credit cards and debit cards and can pay quickly. This application is also password protected and can disable your mobile wallet from the web if you lose your mobile.

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