Google has made a last-ditch attempt to save its floundering mobile wallet by opening it up to more consumers and incentivizing them to use the product, but it is unlikely that even these changes will save the in-store payment component from fading into mobile payments folklore.
Google Wallet was hyped at its launch in September 2011 as the service that could jumpstart NFC mobile payments across the US. Nevertheless, the uptake of the mobile wallet remained sluggish as it was dogged by security concerns and too many caveats for consumer adoption. When it was launched two years ago, an interested consumer would have needed a Samsung Nexus S 4G on the Sprint network, as well as a Citi-branded financial card on the MasterCard network to have even tried the product. Of course actual use of the product could be more limited depending upon where the consumer lived and local retailers’ acceptance of the product. Despite these setbacks, Google has demonstrated a willingness to revise its product to appease the naysayers and to generate more public interest. Earlier updates fixed security concerns, eliminated the required pre-paid card account and made the wallet more broadly available among consumers.
In one of the first major revisions, Google dramatically changed its approach to working with banks, which allowed for more issuing partners beyond Citigroup and enabled the wallet to work across all four major payment networks. A year ago, Google moved to a cloud-based version of the app in order to support all credit and debit cards, including those from Visa, American Express and Discover. It did so by storing card details on Google’s cloud services rather than on the handset’s secured element. It bypassed the MasterCard requirement of the initial wallet by creating a virtual MasterCard number, also known as the Google Wallet ID, in place of an actual credit or debit card number at purchase. As a result, Google stepped inside the transaction and became the merchant of record for all in-store transactions.
Google also made strides to make its service appealing to a broader customer base. Earlier this year, Google Wallet gave consumers the ability to send money using Gmail to anyone with an email address, but recipients had to activate a Google Wallet account to receive it. The transaction is free as long as a bank account is linked to the Google Wallet. Google also released an Instant Buy API for developers that allows for one-click online and mobile purchases. Essentially, these APIs make it easier for consumers to buy products within the Android app ecosystem and across the Web by streamlining the process and allowing consumers to avoid re-entering the payment information. Such a service has become popular among digital wallets due to the low conversion rates
of digital shopping baskets.
Most recently, Google beefed up its loyalty point feature by allowing users to add their loyalty cards to the app by scanning their barcodes or manually entering the numbers — a move that positions Google Wallet to compete with Apple’s Passbook. In store, Google Wallet users also can collect points by scanning the app at the checkout rather than having to use NFC. Users also are able to join select loyalty programs within the revamped app, including Alaska Airlines, Red Mango, and Belly, the Chicago-based loyalty programme. The latest version of the Google Wallet
also incorporates Google Offers, which allows wallet users to store their offers in the app, redeem them at the checkout and access local print and digital coupons through a partnership with Valpak Direct Marketing Systems Inc.
Google also made major steps in opening up the wallet to a broader audience in September. Google overhauled its mobile wallet, opening it up to all Android devices running “Gingerbread,” or version 2.3 or higher, as well as all AT&T, T-Mobile and Verizon network subscribers. For the first time, Google Wallet also was made available on Apple’s iPhone, which does not have NFC. The version for Apple devices was redesigned so that the app doesn’t require an NFC chip. Unfortunately that also means that Apple users can’t use the Google Wallet for in-store payments as could users with an NFC-enabled smartphone. Although Apple consumers won’t be able to make NFC payments, they can use the Google Wallet to make free person-to-person payments or access offers on their mobile device.
The wallet’s ultimate downfall
Google’s initial announcement of its wallet in 2011 could have set the stage for how to ignite a new payment system. Interoperability will likely be paramount to the success of any widespread mobile wallet and from the onset Google started off by partnering with a number of companies across the mobile payments ecosystem, including a mobile network operator, financial institutions and retailers. In theory, those partnerships gave the Google Wallet immediate access to hundreds of millions of customers with financial cards. Google Wallet, however, needed a lot more partners in order to become ubiquitous and each subsequent relationship it did enter was forced. In the process, Google Wallet appeared to turn off financial payment providers and retailers. Despite all the revisions to Google Wallet over the last two years, it isn’t likely the product will ever displace more traditional in-store payment methods.
One of its biggest setbacks was that the Google Wallet was never embraced by the American public because it doesn’t solve a pressing need for consumers. The move toward the integration of loyalty offers and deals is an interesting one, but not enough to entice wide acceptance given that the deals are limited and not tied to consumer preferences or shopping history. When I launched the Google Wallet from my home in Chicago, I was offered a couple of deals in my vicinity, but most were several miles away from my location and certainly not worth traveling out of my way to redeem. In addition, consumers can already store loyalty cards in a variety of apps and send person-to-person digital payments through products led by financial institutions, such as Chase’s
QuickPay. The bundling of functionality within a single app could be advantageous, but there are likely limited scenarios where a consumer would want to redeem a coupon and send a person-to-person payment at the same time where having these two functions in the same app is a big win. Google is onto something by integrating loyalty and deal functionality into its mobile wallet, but the overall product today still falls short.
Secondly, the Google Wallet was never embraced by merchants and, if anything the product more likely became an inspiration for the retailer-led Merchant Customer Exchange (MCX) mobile payment product that could one day compete against the Google Wallet. From the onset of the Google Wallet, Google wasn’t concerned with making money on the actual payment transaction because its focus was instead on collecting consumer data that it could use for targeted ads. Ever since Google initially announced its plans, big merchants have feared that Google would collect their customer data at the POS terminal and then use it to send offers and other promotions on behalf of their competitors. Many merchants didn’t see the value of adding a third-party player like
Google into the mix and sharing their customer data with other companies, which could monetize that data for their own benefit. As a result, nearly 50 major merchants in the US have banded together to form MCX, which plans to store consumer data for all of its retail partners in separate silos so competing brands do not have access to one another’s consumer data. Retailers know that consumer data is vital to understanding consumer behaviour and hopefully driving future sales so they do not want a third-party involved.
Despite many efforts to make the Google Wallet attractive to naysayers, Google’s misstep with merchants and the numerous hurdles to consumer adoption were the wallet’s ultimate downfalls. Of course, it takes both a consumer and merchant base to build out any payment network, but at the end of the day merchants are the biggest sales force for any new payment product and merchants appear to be the one part of the Google Wallet ecosystem that is the furthest away from adoption. While portions of the Google Wallet, including digital person-to-person payments, single-click digital payments or even loyalty programmes, could survive in some form, it is likely that the portion of the wallet that could execute in-store payments is all but dead.