So, what’s new about the new Google Wallet? As they say during Olympic heat events, “Is it in the medal position?”.  C’mon, let us check it out along with Paypal wallet and the yet-to-be-born Groupon wallet.

The major changes in the new Google wallet are :

Following are other notable points:

My first reaction: Why so NFC?? NFC has choked the growth of GW so far and looks like that will continue to be the choke point. Anyway, let us analyze it further.

In my opinion, this is the formula for the wallet to be successful.

Successful Wallet Business (SWB) = Increased Merchant Value * Increased Consumer Value * Ubiquity

If we expand it, SWB = f(Reduced payment tx fee, Incremental sales) * f(Great offers * ease of use) * f (ease of sign up * places it can be used)

Increased Merchant Value : 2 important factors that drives the merchant to participate in the wallet system. Is the cost of payment lower? Does it drive more sales and does it increase the top line?

Increased Consumer Value : Factors that drives the consumer to use the wallet. Does the wallet help locate great offers, do comparison shopping,  save offers easily and automatically? Is the wallet easy to use?

Ubiquity : How easily can one sign up and where all can it be used?

How does Google wallet fare on each of these parameters?

a. Cost per payment transaction:  No info yet on what the merchant will be charged. If Google charges a fixed cc blended rate to the merchant at less than the actual interchange fee, this will be a good proposition to the merchant. Google can afford to make up the losses through some other services. (Levelup model). However,  if Google does pass on the interchange rate as is, there is not a big incentive for the merchant to accept GW. Till we know the exact model, this is a big wildcard!

b. Incremental sales: Because of Google Offers and Adsense and other ad platforms that Google already has, it can definitely drive incremental sales and this will be a huge plus that no other wallet provider can offer! Merchants can also use “Save to wallet” API to help consumer save offers to their wallet. Merchants can effectively run their campaigns on their own. This feature is simply superb.

c. Comparison shopping: Google has the necessary tools to help the consumer do comparison shopping.  Not necessarily a good thing for the merchants, but this will drive consumer usage.

d. Wallet’s ease of use: This is where I feel GW falls behind some of the other wallets. Square and Paypal have solutions that does not even require the mobile wallet to be removed from the pocket. GW requires the consumer to wave near a NFC reader, unlock the phone, open the Wallet app, enter a PIN and then touch “pay”. Not very elegant! Swiping a card is much easier. Full marks to Paypal card here!

e. Ubiquity: A big bummer on this front.  Only some 3-4 NFC phones on Sprint and 1 phone on Virgin network can be used in conjunction with only Mastercard Paypass card readers. In my opinion, this can be a deal breaker for Google wallet. They need to de-link NFC from their strategy and come up with a plastic card (just like Paypal card or Amex’s Serve card) very soon to drive widespread adoption or else, Google Wallet will be history!

Note that I am not biased to Paypal card. They are weak on the following points:

a. Transaction costs: If they offer their online CNP rates to the offline merchant, it is not a good proposition. If they have to offer lower rates, they will have to bear losses on almost every transaction unless the card is funded by a DDA. If the DDA transaction mix is low, they have to take a hit. While Levelup and possibly GW can offer lower card fees to the merchant by leveraging other value added service, Paypal cannot. This will always bea sore point for Paypal.

b. Incremental Sales: Paypal does not have any tools/assets like Adsense and Offers that can help the merchant with incremental sales.

c. Comparison shopping: It can possibly leverage eBay marketplace and help the consumer with this , but it may heavily jeopardize the offline merchant!

Since Paypal is not constrained by NFC, it is high on ubiquity front and on ease of use front. Mobile App, Paypal Card, EmptyHands, ShopKeep POS, etc can definitely help the 120 million wallet holders to easily use the wallets during their offline shopping!

While I was analyzing, Groupon came to my mind..

Finally, let us see how Groupon Payments can possibly fare on these parameters:

a. Transaction costs: Groupon has already announced competitive rates (~ 1.6% flat ?) Fantastic proposition to the merchants.

b. Incremental sales: This is what it does for a living. Very good proposition on this front!

c. Comparison shopping: Can help the consumer on this front as well with the data it has.

d. Ease of use and ubiquity control: Yet to see any apps. Unless they get stuck with NFC, they should be fine. A plastic card, a mobile app, cloud architecture, Pay with Square like app will help them be a sure-fire winner!!

They are a likely dominant player because they have the assets to help the merchant and help the consumer in a physical commerce setting. The challenge they will likely have is the lack of payment and cards expertise, which they can BUY from the market. Hey, they can hire me too and get some kick-ass payments expertise

Will assess Square, Serve and Apple wallets in the subsequent posts.