Google Mobile Wallet: A Big Step for Payments

Yesterday Google announced a new mobile wallet in partnership with Citibank, MasterCard, First Data and Sprint. Is it significant? Yes, very. Why? For a number of reasons. First and foremost, mobile proximity payments are getting a boost from a large player whose primary interest is NOT payments. Paradoxically as it may sound, in my view this is key to finally getting some traction around much touted NFC payments. Celent's view has long been that the payments industry on its own in the developed markets had little incentives to move to NFC. If it's just purely about payments, then the customer already has a number of perfectly valid alternatives to pay at the POS, so why do something that potentially reduces your revenues (as you have to share them with more parties) and increases costs (as you need to invest in both issuing and acceptance)? Well, Google is not doing this for payments and confirmed yesterday that they would not be charging anything for the payments transaction itself. Instead, they expect to make money from services surrounding the payments transaction, particularly from drawing customers to merchants through targetted ads, coupons, loyalty point management, etc. This is consistent with Google's strategy to-date where online ads drive majority of their revenues and their vision for the future (see my previous blog post "How Much Does Google Love Mobile?") Second, while I didn't hear it mentioned yesterday (I could have missed it), I remember reading in March in Finextra, which was quoting Wall Street Journal and Bloomberg that Google's "plans also include terminal vendor VeriFone, which ... will roll out NFC cash-register systems paid for by the search giant." If that is the case, it will certainly help drive market penetration for NFC-capable terminals. I am not aware of any other examples where a player outside of a payments industry (i.e. other than acquirers and card schemes) would be investing in building out a payments infrastructure. Again, for Google it makes sense given that they need these terminals to achieve goals other than just payments. Finally, while it is true that partnering with one scheme, one issuer, one network operator, etc. limits the scale initially, Google neverheless has chosen an impressive list of partners - in MasterCard they have a major card scheme, in First Data, a major processor and in Citibank, a major issuer with an impressive track record of innovation. For Citibank this is part of their focused efforts to create significant value through payments for their customers. Last year they created a Global Enterprise Unit, spearheaded by Paul Galant for exactly that purpose and the unit is starting to deliver results. I saw some in the blogosphere questioning Google's choice of Sprint as a network partner, but I don't really have a view on that, so wouldn't like to comment. Of course, the proof is in the pudding - over the coming months we will get to see if the consumers and merchants truly buy into this vision painted by Google and its partners. However, the sketches provided yesterday indicate that this could be seen as a masterstroke by all involved in years to come.