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At midnight yesterday, Google sent me an email on how the new GoogleWallet update will now allow me to store my "Citi MasterCard" online. As other Google Wallet aficionados may recall (Bueller..? Bueller..?), Citi was the lone standout in Google Wallet's journey to the cloud and its race to conformity. Though to the untrained eye the Google Wallet app experience was mostly uniform irrespective of the card used to pay at the point-of-sale, behind the scenes, if the Citi MasterCard was used, Google had to do things one way versus another way for the rest of the brood.

Furthermore, sharing the precious real estate that is the Secure Element with Citi meant that Google had very little room to maneuver. Embedded SEs, despite being newer to market than SIM-based SE's, were limited in storage versus other chips. The initial embedded SEs that Google Wallet relied on had about 76KB memory, which once you factor in all the trimmings that come with provisioning a card to SE (MasterCard PayPass applet among others), left very little wiggle room. 

So Google, forced by a number of factors (resistance from the carriers and issuers, rising costs and complexities attributed to the multiple TSM model, a lack of SE space to accommodate future provisioning) migrated to the cloud — and left a MasterCard proxy on the wallet that it could use to funnel transactions through. The only standout to this model was the umbilical cord to the original Google Wallet partner: Citi.

I had predicted last September that the partnership's days were numbered. When the wallet is Google's, and it needs to both reclaim the space on SE and reduce the provisioning or account management costs that it owes to its TSM (FirstData), the only reason for it to carry the torch for Citi would be if Google Wallet customers demanded it. But it so happens that any returns for items purchased using Google Wallet untill today had also been slightly broken. If you bought an item using the virtual MasterCard then the returns followed one route; of you purchased an item via the Citi card then returns were handled a different way.

Additionally, it was disappointing for a customer to see “Paypass Merchant” instead of “McDonalds,” and “Sent” instead of “$25.54, when paying with the Citi card in GoogleWallet (unless one was planning to hide a fastfood habit from a spouse). A small mess — especially when it should be attributed to powers beyond the partnership — but still a mess for Google who demands conformity in customer experience across all its offerings.

In the end, this partnership served no broader purpose for either partner to keep alive for any longer. Google is ready to move on beyond Wallet 1.0 and realizes that it can do so without issuers in tow. Furthermore, it had been expected for a better part of three months that Google will launch its partnership with Discover and this puts Google as an indispensable element back in the mobile payment narrative.

For the issuers who were originally courted by Google Wallet in its early days this serves as validation, that they were correct in choosing to stay away. But that is no excuse for ignoring what Google and others are building as a parallel framework to the value-added services (credit card rewards being one) card issuers use to show that customers will choose them over Google. (But if Google could tout interchange relief to merchants as an incentive to court them, don't you think a Google Rewards program will be close behind, supported by credits redeemable the Google Play store? Once again, it's not an if, but when.)

Finally, where does this leave Citi? Citi is a global institution with enough smart people at their end to make up for lost time. Google Wallet did not become the boogeyman that issuers feared back in 2011, and Citi can afford to roll out its own mobile initiatives in a measured pace at a global scale.

And there had been rumblings of a Citi wallet all through 2012 and we may see it soon manifest outside of the U.S. before Citi attempts to do so here. Google may have opted to cut the cord so that there is no ambiguity when that happens. But they still have both Citi and FirstData to thank for teaching them how to dance.

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The Future of Mobile Wallets

Latest posts by Cherian Abraham
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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