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I believe in Google's capability to actually pull off mobile payments. I believe Google does get it. With all its initial failings, its misplaced loyalty towards NFC and the existing payment rails, I believe it truly have a shot at fixing payments and closing the loop in local commerce.

Let's look at what is going right for Google: Android is fast becoming the dominant ecosystem on mobile, with over 200 million devices so far and 550,000 activations happening every day. It has made Android a force of nature that is now slowly eating away at Apple's market share. It has a mobile wallet initiative out front at least more than a year before the closest competitor – Isis. It has had some notable successes with retailers (e.g., Gap) and has partnered with New Jersey Transit for payments. Formidable partnerships with Citi, FirstData and MasterCard should be all that is needed to prod more issuers in to joining Google Wallet.

Even with all this momentum, Google Wallet does not seem to be having a good day so far.

Despite Visa's significant call for EMV in the U.S. by way of threats to shift fraud liabilities to processors (and from there to merchants), balanced equally by the carrot of PCI audit compliance avoidance, NFC still faces considerable challenges to adoption. Apple chose not to include NFC in the iPhone 4S knowing fully that to do so without first creating a compelling offline commerce solution (the strains of which were heard in its recently revamped Retail App enabling easy payments in stores) would be advantageous to Google or others. Rumors abound that the Isis carriers are discouraging Google Wallet from being included on the Android phones provisioned on their networks, which has far reaching implications for both Google and Android. Meanwhile, Amazon has the clout to both build a payments presence and roll it out as part of its forked Android flavor Fire. But more importantly, Google Wallet is lacking what it needs most to make an impact: issuers.

Issuing banks are not exactly lining up on the streets to sign up with Google Wallet. In fact, news broke recently that indicated that Isis landed three much coveted issuers including JP Morgan Chase, US Bank and Capital One. It seems that banks, genuinely fearing disintermediation by Google, are more inclined to pay (if required) a rental fee and share the interchange fees (again, if required) with Isis rather than inviting Google to the party.

Yet another complaint from the issuers seems to be that the Google Wallet solution is oriented primarily around Google, and that there is very little room (and branding) in there for issuers other than providing the rails and supporting infrastructure. Issuers see this as a losing proposition for them rather than a winning one. They fear being marginalized by Google and losing customer mindshare to Google once it is able to create a compelling wallet experience by weaving together loyalty, rewards and payments at the point-of-sale. Google (and Apple and Square and Dwolla and Paypal and BankSimple and Movenbank and many others) are the barbarians at the gate, clamoring for their spoils, their hoarded treasure, a threat to the oligarchy asleep, cloistered behind the tall gates.

So what should Google do? Should they curry favor with those who are nonchalant or disenchanted? Absolutely not. Let Google be Google. Let that be the rallying cry.

And what about banks? Are they justified in their lack of trust in Google and others? Or are their newly formed allegiances with Isis grounded in the realization that the carriers hold far more power than Google? It also has to be, that as the one who enrolls customers, carriers are being recognized by banks as the ones who controls the phone and possibly the relationship with the customer, maybe more than Google. With over 200 million phones combined served by the Isis carriers, it can offer the scale that is necessary for mobile payments to succeed. Moreover, at least in U.S., carriers seem more inclined to partner with the issuers than go at it alone.

In the end, banks would be better served if they understood that disintermediation will occur with or without Google. Isis, Google Wallet, Square, Paypal, Bank Simple, or the 70 other mobile wallet initiatives out there, will eventually offer their customers a value proposition that far exceeds anything else presently in the banks' quiver of arrows. And that, in the end, is inevitable. The only question is whether they have the fortitude to ask themselves as to what the others may have in their quivers (no more archery analogies!) that will make banks irrelevant to their customers in 2, 3, or 5 years, and act swiftly on that premise so their competitors do not get there first.

Or they could choose to be Bank Of America and obsess over $5, customer relationships be damned.

Note: Google has indicated that it will support credit unions on its Wallet in future iterations. But at the very least it needs to show some love towards small to mid-sized banks. Currently, it has shunned this promising sector and it might just be one more of Google's follies that it will come to regret.

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User Comments – Give us your opinion!
  • Eva Grzybek
    Excellent post - the situation around mobile wallets is fascinating and looks to become even more so as the game of musical chairs carries on.
  • Vinny Breault
    Is this article meant to be unbiased or a sales pitch? Or is the Author a consultant for Isis. I recommend you check you facts, especially when naming 3 tier 1 issuers. You may also want to check with your legal department as well with these type of implications. Seems reckless.
  • James Wester
    Mr Breault,

    Thank you for the feedback. As a blogger for Mobile Payments Today, Mr. Abraham is sharing his opinion on the market Google Wallet is facing based upon his experience and analysis. As an opinion piece it is meant to reflect the feelings and biases of the blogger. That's what makes it an opinion piece. (If you would like to respond with your own post, I would welcome your contribution.)

    While it may be an opinion, the post jibes with what we have been seeing and hearing in the market as well. As impressive as Google Wallet is, no other issuers besides Citi have joined the effort. Even if Citi is the number three credit card issuer in the U.S., that's still a pretty big limitation on the adoption of Google Wallet. That observation is neither new nor peculiar to Mobile Payments Today. (Neither is speculation that JP Morgan Chase, Cap One and US Bank are looking to work with Isis. That has been reported several places, most notably in NFC Times.)

    If there is an obstacle to attracting card issuers and banks to join the Google Wallet effort, then conjecture on what that obstacle may be should be welcomed in the spirit of encouraging discussion about mobile payments. Furthermore, if Isis has surmounted that obstacle and attracted issuing banks as partners, then that should be a concern for Google. (One might even call it "trouble brewing.")

    As for the idea that Mr. Abraham's opinion is based on a financial relationship with Isis (or any company), that is simply not the case and the implication is beneath anyone who wants to have an honest discussion of how the mobile payment market is evolving. It is possible to have an opinion not based on a financial relationship just as it is possible to have a disagreement without impugning the integrity of the person with whom you differ.

    James Wester
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Cherian Abraham
Cherian is a Mobile Payments Advisor with Experian Global Consulting. He is also an advisor to ModoPayments. As a mobile payments veteran and founder of Drop Labs, Cherian has worked with leading banks, retailers, mobile platform providers and startups in this space. Opinions expressed here are strictly his own, not that of Experian.
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