Google Gears Up for NFC M-Commerce; Wallet War Ahead?

As Google’s outgoing CEO Eric Schmidt put it at last month’s Mobile World Congress, NFC combined with smartphones represents a "mega-scale opportunity" and promises to "revolutionize" electronic commerce and payments.

Google has been gearing up to take advantage of that opportunity. I’m told it has been contacting a number of large U.S. merchants, including Wal-Mart, to get buy-in for its plan to push location-based mobile marketing and advertising to consumers, who could then tap their Android NFC phones using a Google-developed mobile wallet.

Google also has been putting together a team of payment and other mobile-commerce professionals, as it continues to build the wallet and the foundation for the cloud-based apps that would pinpoint a consumer’s location, know his interests and tap to collect and redeem offers and pay with NFC–with the consumer’s opt-in, of course.

And the Web giant has been working with big U.S. acquirer and processor First Data, which could provide connections with potentially millions of merchants, including small and medium size retailers throughout the United States. First Data also has introduced a trusted service management offer, and Google, I’m told, is interested in using it for applications downloaded to the wallet, perhaps for its own services or those of its partners.

Google also has been rumored to be in discussions with contactless reader maker Vivotech and point-of-sale terminal vendors, such as VeriFone. Along with First Data, these hardware vendors would provide the vital links between merchants and Google’s mobile-commerce platform when Android-users tap at the point of sale.

But everything I’ve heard from people who do more than just guess about Google’s–or for that matter, Apple’s–plans for NFC says neither wants to face the uphill battle of launching its own payment scheme at the physical point of sale.

Instead, they would build NFC-enabled digital wallets for their smartphone operating platforms, in which payment service providers, including banks, could store their applications. Apple’s wallet plans are less certain, despite a recent patent application with an e-wallet icon on the home screen.

But Google is definitely working on the phone software, code named "Cream," which was due out by April but might be delayed until early summer.

NFC Payment is a critical component in Google’s grand m-commerce plans because it consummates the consumer’s relationship with merchants that Google hopes to broker through its targeted mobile promotions and access to consumers when they are in or near the retail outlet. This targeted access is what Google would be selling to merchants. Besides that, the payment transactions would gather data on consumers’ buying habits for the next round of promotions, again, with the consumer’s permission.

"For Google, the opportunity is not the 1.5% they would receive for payment. The opportunity is the 10%-plus they get for referring the sale to the merchant. That’s why the payment business isn’t interesting (for Google)," said one observer of the Web giant’s moves in NFC.

The company made more than 95% of its $29.3 billion in sales last year from Web advertising. It wants that revenue flow to continue unabated as consumers do more and more browsing and search queries on their smartphones.

And smartphones combined with NFC could give Google something it lacks on the fixed Internet–access to physical merchants–where the vast majority of commerce is done. This is probably the crux of the mega-scale opportunity Schmidt was talking about.

Potential access to millions of physical merchants and targeted offers were likely the main things Google was after when it made its mega-bid for deal-of-the-day e-commerce site Groupon. Groupon, however, rejected the $6 billion offer late last year.

"Wouldn’t Google love to find a Groupon killer with something you could redeem at point of sale?" Todd Ablowitz, president of the U.S.-based Double Diamond consulting firm, told me.

He could not say whom he thinks Google might work with for the payment or other pieces of its m-commerce platform anchored by NFC phones.

Are Citi and MasterCard Onboard?
But I’m getting strong signals that a Citigroup-issued MasterCard PayPass application would be among the first payment card accounts in a Google wallet.

Citi is the only one of the top five U.S. banks not working on contactless microSD cards—at least not that we know of. Of course, Citi mostly works with MasterCard, which only recently gained access to the products of the main vendor supplying contactless microSDs for payment at present, DeviceFidelity. The vendor had had an exclusive deal with Visa Inc.

But unlike such Citi rivals as Bank of America, which appears to favor microSDs or other NFC alternatives, Citi has been among the strongest backers among U.S. banks of full NFC.

Yet, up until now, besides a rather anemic launch of a passive contactless sticker carrying a PayPass application last spring, Citi has done nothing in contactless-mobile payment stateside since an NFC trial it launched with MasterCard in New York City in 2007.

That absence is despite bubbly statements by a Citi executive about how much customers love NFC. Some execs made the same noise after a large NFC trial in Bangalore, India, in 2009.

Of course, compelling NFC phones will only become available this year. And Google is not the only platform or device supplier that is working on a mobile wallet.

If Citi, in fact, is going to be part of the Google wallet, it would bring MasterCard along. If nothing else, MasterCard would help to fund Citi’s implementation.

MasterCard also would be more flexible than Visa Inc. in working with new players in the payment industry. And the card network has been preparing for the coming of full NFC.

In January, it hired Mung-Ki Woo, in part for his direct experience in handling NFC projects with mobile operator France Telecom-Orange Group.

Referring to plans by some mobile operators to introduce their own payment brands using NFC phones, Woo told me earlier this month that MasterCard is "prepared to enter a dialogue" with the telcos.

"They will yield more business benefits by working with MasterCard than trying to sort of reinvent the wheel," he said. "Proximity payment is a complex domain."

MasterCard, like Citi, First Data and the POS terminal and reader vendors are not confirming plans that they are working directly with Google.

Wallet War Ahead?
Google seems to agree that it doesn’t pay to launch its own payment scheme. But it will be interesting to see how Google’s wallet stacks up against the wallets planned by three of the four major U.S. mobile carriers, AT&T, Verizon and T-Mobile USA.

The U.S. telcos plan their own payment brand, Isis, which will anchor the wallets. So a Google wallet, at least in theory, could reside on the same Android phone as an Isis wallet.

But which secure element would any Citi-MasterCard PayPass payment applet be loaded on as part of a Google wallet? Would it go onto an embedded chip or possibly the SIM card, the latter directly controlled by mobile operators? Who will control the embedded secure chip in these Android and other NFC phones?

Schmidt, who will step aside next month as Google CEO and become executive chairman, did not discuss this issue in his relatively brief comments about NFC during his keynote at the Mobile World Congress last month in Barcelona. But he did seem to lump the contactless NFC chip in with the secure chip, speaking of it as one unit. Was he talking about an embedded chip?

The first Android NFC phone on the market, Google’s Nexus S, made by Samsung and released in December, has an embedded chip but also supports NFC applications on SIM cards–though the application-programming interface for payment using NFC’s card-emulation mode is not yet part of Android. The same architecture is expected for the forthcoming Samsung flagship Android phone, the Galaxy S II.

Some observers believe the U.S. carriers would want to hold the keys to all secure elements in the NFC phones they sell, including those for embedded chips. But these keys would be in the control of the handset makers, unless telcos are able to insist the phone makers hand over the master keys after the phones leave the factory.

"The fundamental question is, can smartphone vendors embed NFC in the phone and launch NFC services and still have the carrier sell phones to customers?" one observer remarked to me.

The battle over the secure element in NFC phones that has simmered for years between mobile operators and banks now seems to have some new contenders–Google and the Android handset makers, as well as Nokia-Microsoft, Research in Motion with its planned BlackBerry NFC phones and, of course, Apple, though it's not clear whether the latter will adopt NFC for the next iPhone. The secure chip in NFC phones will become an important piece of real estate, supporting potentially lucrative applications, such as payment, and the corresponding apps in the platform providers' app stores.

But with Google planning to launch its NFC wallet as early as this spring–one of the first real shots in that battle could be fired soon. 

Article comments

 
mroyer1 May 26 2011

They should have called it "Google Charge" -- much better, catchier, name. That is unless they plan to use that for all their new energy initiatives.

Mark Royer
Knowledge Solutions

Please register or login to post a comment.

HEADLINE NEWS

Alipay to Expand Acceptance of Mobile Wallet in Russia

NFC TIMES Exclusive Insight – Alipay is expanding acceptance in another overseas market, Russia, seeking to capture business from Chinese tourists who travel to the country.

Apple Discloses Plans for Four More Apple Pay Markets; Confirms Most Transactions Outside of U.S.

NFC TIMES Exclusive Insight – Apple Tuesday disclosed plans to launch its mobile payments service in four more small markets, including three countries in the Nordics, with the tech giant seeing higher usage of Apple Pay outside of the U.S., where NFC-enabled POS terminals are still not widely available.

As Use of Wallets for In-Store Payments Disappoint, P2P Payments to Surpass $120 Billion in 2017

NFC TIMES Exclusive Insight – Research firm eMarketer predicts that mobile peer-to-peer payments in the U.S. will grow by 55% to more than $120 billion in 2017, an amount that is expected to double by 2021.

Mastercard Launches Campaign to Push New Zealand Retailers to Accept Contactless Payments

NFC TIMES Exclusive Insight – Mastercard has launched an initiative to encourage retailers in New Zealand to adopt contactless payments, noting that nearly three-quarters of New Zealanders use contactless.

Banks and PayPal Announce More Deals for In-Store Transactions, But It’s Unclear When NFC-Enabled PayPal Wallet Will Arrive

NFC TIMES Exclusive Insight – Although Bank of America announced that its customers would “soon” be able to use the PayPal Wallet to pay for purchases in stores using NFC, a bank spokeswoman has told NFC Times that the NFC-enabled wallet might not even be available next year.

Experts: Don’t Expect the Amazon Go or Uber Payments Concept to Hit the Retail Chains Anytime Soon

NFC TIMES Exclusive – With the widespread use of Uber and launch of the Amazon Go experiment, some payments industry observers are predicting it might not be too long before invisible payments comes to brick-and-mortar stores.

Swatch Pay One of the First Low-Tech Payments Wearables That Can be Provisioned After the Sale: How It Works

Jul 21 2017

NFC TIMES Exclusive Insight – While such smartwatches as the Apple Watch are routinely provisioned with payments cards after they are in the hands of consumers, that hasn’t been the case for low-tech analog watches. Swatch Pay could change that.

Analysis: Apple Tries to Jump-Start Apple Pay in China with Generous Week-Long Discounts and Offers

NFC TIMES Exclusive Insight – ­Apple, which is losing its battle badly for market share in China’s huge mobile payments market, has launched one week of generous promotions in hopes it can begin to turn the tide.

PayPal Hopes Samsung Deal Will Help It End String of Failures in Tapping Offline Merchants

NFC TIMES Exclusive Insight – PayPal is believed to have cut its deal with Samsung to be part of the Samsung Pay wallet mainly to gain access to the device maker’s MST technology, enabling consumers to pay in stores with their PayPal accounts without having to look for an NFC-enabled POS terminal.

Backers of WeChat Pay and Alipay Continue to Expand Acceptance Outside of China

NFC Times Exclusive Insight – China’s two large mobile payments services, Alipay and WeChat Pay, continue to roll out acceptance in Europe, North America and other parts of Asia, as they follow Chinese tourists to these destinations.

Denmark’s Largest Bank Plans to Expand Reach of Its Growing MobilePay Wallet; Continues to Favor BLE over NFC and QR Codes

NFC TIMES Exclusive –  Danske Bank’s MobilePay service in Denmark is one of the few mobile-wallet success stories globally, though on a small scale. Now the bank is planning to expand to other Nordic countries and seeks to continue to use BLE technology, not NFC, to enable the in-store piece of its mobile payments service.

Despite Launch of Three Major ‘Pays’ in Taiwan, Visa Plans to Also Support QR Code Payments on Island

NFC TIMES Exclusive Insight – Visa says it plans to support QR code-based mobile payments late next year in Taiwan–a market where all three major “Pays” wallets have launched supporting Visa-branded cards with NFC.