Google entered the payments field in 2006 with its Google Checkout launch. Even though it was a successful launch with its promotional free transaction fee to the merchants, it never sustained the momentum while Cybersource and Paypal saw explosive growths. So it is a distant 3rd or 4th player in the online processing world. It sure gained a wealth of experience in the online transaction processing world. Assuming that it still retains the people, technology, experience along with 6 years of historical data – it is a great asset!
That was for the online world. In the offline (retail) market, we saw Google launching its Mobile Wallet last year. One of the first ones to launch the wallet. Even though they haven’t seen much growth, the other players are also struggling – read ISIS, Visa’s V.me, American express’ Serve. Because of its NFC based approach, it has got entangled in the chicken and egg situation. While NFC based solution is robust, it requires too many stakeholders. Google has to manage the MNOs, TSM, Issuers, card brands, POS vendors, Handset vendors before even it starts looking for the consumers (to use the wallet) and merchants (to accept the wallet). While NFC solution enables CP rates (card present ) rates, getting users to adopt this is really difficult. Look at the non-NFC wallets (Paypal, Square) exploding even though they attract CNP (Card Not Present) rates. Whatever it is, Google has the gained a valuable asset to play in the offline payment space.
But what makes Google in a strong position is the following strong list of other products it has to drive wallet adoption.
1. Android ecosystem and the “app” control
2. Adwords
3. Google Offers
4. Ubiquity through its phones
5. Tablets (for POS solutions)
6. Huge developer community
7. TxVia (this is the best asset that they can leverage)
8. Terrific Google Brand
9. Cash
Consumers demand the ability to discover (the products they wish to buy), great deals (to find the best rates), security (will their money be protected?) , easy ( easier than managing the physical wallet) and reliable (what if they lose the phone) system in order to adopt. Google has in-house products/services that can enable all these. No other company (Paypal, Visa/MC, Amex, Apple, Banks, MS) has all these.
The best asset is TXVia. With this, it can enable users to purchase WITHOUT a Visa/MC/Amex card. That means no dependency on any bank, any payment network and doesn’t have to worry about Card Not Present rates.
Merchants demand low transaction cost, new customers, ability to create loyalty programs. Google can use its assets to bring new customers (Adwords, search, Google offers). It can work with its developer community to bring in the other functions (billing, POS, post-sale CRM, accounting).
If Google provides an integrated end to end platform for the merchants and reduce the transaction fee (with its own Txvia, it can afford to cut the transaction fee), which merchant doesn’t want to join?
When consumers and merchants are satisfied, Google does NOT have to care about banks, processors, issuers or anyone else. What a position to be in, considering the target B2C market size is $4 trillion in the US alone!!
But … a big but, is that Google needs to come up with a cloud-based solution in addition the the NFC-based solution. Only then, will it see the consumers adopting Google Wallet. If Apple comes up with a cloud-based solution, it will sweep the masses into using their wallets!