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Google Is Right When It Says That Mobile Payments Are Just Starting

Posted by Charles Golvin on May 26, 2011

Today Google announced its Google Wallet product, along with partners Sprint, Citi, MasterCard, and First Data (Forrester clients can read our more detailed take on this announcement here). While Google Wallet will initially support Citi-branded MasterCards, the product is open and will accept payment solutions from multiple networks and issuers. Google introduced its Wallet by saying, “This is just starting,” and Google’s right — the path to the new world of transactions that the company painted will be a long and arduous one for consumer product strategists. Why?

  • Not many phones. Today the number of phones on the market that support Google Wallet is as close to zero as makes no difference — the Nexus S that Sprint launched on May 8th. That will change — by the end of 2012, we expect that virtually every smartphone sold will include NFC.
  • Not many issuers. Consumers want to be able to use their existing payment options, not have to sign up for a new credit or debit card in order to use their phone.
  • Not many merchants. Consumers don’t want to have to look for an acceptance mark; they expect that the merchants they frequent will support the payment options in their wallet. While PayPass terminals are becoming more prevalent, they are a long way from ubiquitous.
  • Not much incentive for consumers. Some consumers might say it’s convenient to just carry their phone, but wallets hold a lot more than just payment instruments. And it’s not clear that pulling out our phone, opening an app, inputting a PIN, and waving our phone at the POS is more convenient than swiping a credit card or exchanging cash.

In this light, Google Offers is the more important announcement, because Offers is what will help catalyze the slow change in consumer behavior by offering additional value tied to Google Wallet transactions. And after all, Google isn’t after the payments themselves; it’s after the associated data tied to the entire commerce process since that’s what it will monetize.

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Comments

Why is issuer significant?

Comment from Nancy Wichmann (not verified) on Sat, 05/28/2011 - 11:15

"Not many issuers" - Having worked for Visa in the past, I fail to see why the issuer is of any significance, except possibly for recharging the pre-paid cards. What matters is the consolidator, and First Data may be the largest. They are the ones who get the payment data and pass it on to the credit card switch for settlement.

It is interesting to note that First Data is limiting this to only MC. They process just about any credit card that is available. Perhaps they are doing this because MC is the smaller deck?

Thanks for your thoughts,

Comment from Charles Golvin on Sat, 05/28/2011 - 12:21

Thanks for your thoughts, Nancy.

The number of issuers matters because that determines whether or not a customer can add their existing preferred card to their Google Wallet. If you only have a Chase or BofA card today, the only way to use your Google Wallet is to choose the Google prepaid option — which is a hassle since you have to first fund it — or sign up for a Citi card — which is very unlikely since, as I noted, the Wallet really doesn't offer that much value to consumers today.

As to the choice of MasterCard, I don't think that's First Data's choice, I think it's Visa's since they have their own mobile payments initiatives and don't want to dilute them today. It's also likely a matter of expediency, since more players in this initial phase would have added more complexity and challenges to bringing it live.

I suspect that these devices

Comment from plumbing plumbing (not verified) on Mon, 05/30/2011 - 04:01

I suspect that these devices will become the Identity Thieves targets-of-choice as soon as the public buys enough of them. That's fine. But I don't plan on being among them.