To be fair, Google may have had little choice, with cooperation refusals from Apple and Research In Motion's BlackBerry group pretty much forcing Google to go it alone. That doesn't make the mobile-payment fragmentation any less serious, though. If Apple, PayPal and others opt for their own approaches, which seems inevitable, the fragmentation will make it even harder for consumers to embrace mobile payments and for any retailer to get enough traction for mobile to be profitable.
Indeed, the Google exec who handled much of the rollout—Google Payments VP Osama Bedier—used that event to lay out the case for why multi-platform support is so crucial. At the time, though, he was making the case for openness everywhere other than mobile platforms. Still, his argument works.
"We're building an open-commerce ecosystem, and Google Wallet is built on top of that open platform. By the way, open is who we are at Google. It's a deep part of our culture, a part of our history, and we know that open solutions add value for all players," Bedier said. "Open systems drive competition and innovation. They deliver consumer choice and, most importantly, exponential growth."
One CIO at a major apparel chain said he is finding these latest mobile moves quite frustrating. "The battleground is becoming pretty well defined—carriers versus banks versus Google versus Apple versus Who Knows—but the winner is less clear. Save for it not being the carriers. They've stepped up to their usual standards of excellence," he said.
Forrester M-Commerce Analyst Sucharita Mulpuru said Google's choice to roll out a single-platform offering is going to make adoption a lot more difficult. "This is such a non-starter on so many levels," she said. "If a Droid phone was the only thing you ever needed to complete a transaction, that would be one thing. Alas, it's not. And no one even asks why NFC has been so challenged, even in markets like Japan, where virtually all devices have NFC capabilities and DoCoMo is behind it. All these guys think they can go at it with payments alone. There's a reason they call it a network. Good luck."Mulpuru said going partway open is generally going to frustrate both customers and partners. "It sounds like they see 'open' in the same way that APIs are open: in a select way. Anyone can develop something for it, so long as it's within the parameters of what has been outlined. It's all about not having skin in the game and trying to avoid investing in development support—usually the result is little upside or uptake for anyone."
The Forrester argument is quite legitimate, which is a shame, because what Google unveiled seemed to have most of the elements of a first-class payment system. Despite some payment security hiccups during the demonstration, the Google presentation included what appeared to be a very well-thought-out, seamless user interface. The security is primarily dealt with on the chip, but Google also included the ability to shut off the app. It's possible to activate and deactivate any of the individual cards in the virtual wallet, too. That's a nice touch for addressing the security concerns of cyberthieves who are trying to catch card data in the air. The card is only activated right before the purchase and can be deactivated seconds after the purchase is completed.
But let's get back to Forrester's point about NFC challenges in Japan, which is arguably the most mobile-phone-friendly country on the planet. To paraphrase that old standard, New York, New York, if NFC can't make it there, can it make it anywhere?
With today's retailers, there is a huge investment in NFC integration that has to happen before we even know whether NFC support will translate into NFC transactions. Even if the vast majority of those investments are heavily subsidized by Visa and others in the chain—including Google and Apple—it's not just the investment dollars that are an issue. It's also an issue of time.
The move to retail NFC "is not a 12 to 18 month investment," said Peter Osberg, senior VP for Marketing at Denver-based retail payments vendor IPCommerce, who added that it could take significantly longer.
Anything that will take more than two years in mobile might as well take 20 years, given how quickly M-Commerce is changing. Then there's the issue of getting NFC phones into the hands of enough consumers, many of whom will have to upgrade.A Forrester report on Google Wallet points out how few NFC-capable phones exist today. "Relying on an installed base of phones that is today indistinguishable from zero, a single payment system, a single card issuer and a modest network of merchants capable of accepting these phone-based payments means that the near-term impact will be negligible," wrote Forrester Analysts Charles S. Golvin and Thomas Husson. "However, Google's interest here isn't in the payments. It's in the data that underlies the complete chain of commerce, including consideration, promotion, transaction details, coupons and receipts."
Remarkably enough, that means the interests of Google and retailers are in synch. Retailers don't want to be in the payments business any more than Google does. The more that can be pushed off on the processors and the card brands, the better. The only interests in POS involve CRM and boosting (and tracking) sales. OK, if the system can help with anti-fraud/loss prevention, that's nice, too.
The CIO at that major apparel chain said Google's move is making it explicit that retail mobile will have very little to do with actual payment. "The future potential here is huge and it actually is having less and less to do with payment itself. Think CRM. Sadly, payment is likely the ticket to entry so we'll have to scrape the losers off the battlefield before we can start leveraging the real value. But who are the CRM plays that really get what this technology could do in-store? Please stand. Hello? Hello?"
Getting back to the Google trial and the very near term, how much back-end POS work does the Google Wallet require? According to Google partner Verifone, quite a bit.
What about the chains that are already using NFC readers? Surely they should have an easy transition? Nope. "Of the NFC readers out there, the majority—close to 100 percent—will need to be updated," said Paul Rasori, Verifone's senior VP for Global Marketing. "These readers are much more advanced than" current PayPass terminals, he said. On top of those upgrades will be the usual software changes throughout the network.
With all this effort and cost, is it worth it to get involved in one of these early stage mobile-payment trials? Quite possibly. There are two reasons to want to do so. First, it always has been about the data and improving the customer experience—and upsells. These trials will almost certainly provide much critical data that will be useful no matter what happens next.
The second reason to do so is what we'll call the Gambler's Choice.The second reason to do so is what we'll call the Gambler's Choice. The most likely scenario is that there will be trials with Google and Apple running simultaneously. Within about 18 months, the market—consisting of that tiny subset of consumers and retailers actively involved in trials—will decide a preference. Unless the underdog fights back with a clever new twist, the market will rapidly gravitate to the victor. The loser will then agree to a deal with the victor, with very unfavorable terms, and one mobile standard will emerge.
Here's the gamble: The retailers that happened to have chosen to trial with the victor will have a huge headstart on development. The losers? Not so much; but they'll still be far ahead of the retailers that engaged in no trials. That makes choosing properly very important. Given that Google has announced and Apple hasn't, retailers have no way of knowing exactly what Apple will offer. Therefore, retailers trying to make an informed choice between the two—between something that exists and something that doesn't—have an almost impossible task. Let's look at the partner list, though, for some clues.
Google's primary payment partners are Citi, MasterCard, First Data and Sprint. The most conspicuous missing player is Visa, so there's a fine chance it will be in the Apple camp. That's huge. AT&T and Verizon are up for grabs, and Apple already has strong relationships with them. Being first gives Google some strength, but the potential Apple lineup is powerful.
When asked if Google Wallet would exist on other platforms, Stephanie Tilenius, Google's VP for Commerce, said at a panel discussion this week that "this is an app that works on any phone, and there's an NFC sticker that can be put on the back of the phone." Although true, that's rather misleading. The app might work on the iPhone, but it can't get on the iPhone without Apple's permission.
That's akin to selling a bowling ball to a child. The child balks and says, "Why would I pay you for a bowling ball? There are no bowling alleys anywhere near here. I couldn't use it." The salesperson replies, "This bowling ball will work in the living room of every house on your street, including yours." He just doesn't mention the permission issue.
And then there's PayPal. PayPal and parent eBay sued Google last week and specifically sued Tilenius and Bedier, both of whom used to work at eBay. The accusations are the usual, that the executives breached confidentiality agreements. But the lawsuit also makes it clear that PayPal, which said it had been negotiating a deal to handle payments for Google's Androids until Google backed out of the talks, sees itself competing for payment attention with Google.
"Both PayPal and Google are currently offering their mobile-payment and POS technologies to major retailers for trial use," the lawsuit filing said. "Although PayPal's services and Google's services are not mutually exclusive, at this stage it is unlikely that a retailer would invest time and effort in testing both companies' products."
Is it at all possible for the mobile-payment space to get any less tidy? I didn't think so.