Google Wallet Revamps App, Welcoming iPhone; While NFC’s Momentum Sputters

By Kate Fitzgerald, Emerging Payments Editor 

Google Wallet’s latest makeover—a revised mobile app pushing merchant offers through more channels that’s available now for the first time to Apple Inc.’s iPhone users—means millions more consumers may give it a try. Most smartphone customers can have easy access to Google Wallet for P2P transfers and mobile Websites with a “Pay with Google Wallet” button. But Google’s decision to push broad distribution of its mobile wallet sans NFC is not good news for the future of NFC payments in the U.S., with alternative approaches on the horizon.

Deep-pocketed Google isn’t shy about shutting down products that don’t take off, so the latest revamp of Google Wallet suggests despite its ups and downs, the parent company is optimistic about the wallet’s future, James Wester, research director at IDC Financial Insights, tells Paybefore. “The retooled Google Wallet for Android and the iOS version add to a perception that [Google Wallet] is moving in a new, positive direction and that Google is committed to the product,” Wester says. “The iOS version probably shows Google’s realization that if they’re going to attract merchants to partner with them, they need to reach iPhone users.”

Deals, Deals, Deals

What better way to jazz up Google Wallet’s merchant deals than to leverage Google’s vast Web reach more effectively?  With its mobile app overhaul, Google Wallet users now may capture deals and offers from Google Maps, Google Search, Google+ or Google Offers and view or redeem them within the Google Wallet app at checkout, according to the company’s September announcement.

Tying Google Wallet to some of Google’s highest-volume consumer services is a smart move, says Rick Oglesby, a senior analyst with Aite Group. “This is a service-centric approach versus the former payment-centric approach, and since Google has some wildly popular services, the [company is] greatly enhancing its probability of success with Google Wallet.”

Google Wallet’s updated app also has a new feature to store loyalty cards and membership credentials, a la Apple’s Passbook app, enabling users to earn loyalty points in various programs by scanning the app at checkout.

NFC Momentum Stalls

The search engine giant still touts the availability of 29 NFC-enabled mobile phone models offered by Sprint and a handful of small mobile network operators supporting Google Wallet’s tap-to-pay feature, designed to be a quick and convenient way for consumers to check out at merchant locations equipped with NFC technology. And Google says it has more NFC-enabled devices on the horizon and “continues to invest” in NFC with its partners.

But NFC now appears to be a significantly lower priority for Google Wallet than it was when the concept debuted in 2011. Walgreens and Foot Locker are among retailers that have enabled NFC at the POS on a national basis, but analysts say there is little take up of NFC at participating retailers. After those initial implementations, NFC momentum has stalled.

Meanwhile, U.S. mobile network giants AT&T, Verizon and T-Mobile have blocked Google Wallet, citing security concerns, while they continue to support Isis, a rival NFC-based mobile wallet that faces its own challenges. Capital One and Barclays recently opted out of Isis after participating in a much-delayed pilot launched last fall. American Express Co.—by integrating its Serve platform—and Chase have committed to Isis, which plans a national rollout before the end of the year.

Now a number of observers are taking a bearish tone about NFC’s U.S. prospects. “Even in Europe, where NFC’s prospects looked much brighter than in the U.S., people are questioning whether banks and mobile network operators will ever find a workable partnership,” Zilvinas Bareisis, a senior partner with Celent Group, tells Paybefore. He predicts that if present trends continue, NFC payments will “really struggle” to take hold in the U.S.

“Even in Europe, where NFC’s prospects looked much brighter than in the U.S., people are questioning whether banks and mobile network operators will ever find a workable partnership.” —Zilvinas Bareisis, Celent Group

Smart Card Alliance Executive Director Randy Vanderhoof is more optimistic about NFC’s prospects, making his case for staying positive about NFC in a new blog.“There are plenty of NFC-enabled handsets in the marketplace now and shipments are forecast to reach a billion devices per year by 2017,” he says. But broad NFC payment adoption will require changes to the acceptance infrastructure.  That takes time, just like it did for PIN debit and even the original move to magnetic stripe, he notes.

Meet ‘BLE’

Compounding NFC’s dimming prospects is the rise of new Bluetooth-enabled payment systems that promise to make in-store mobile payments a hands-free affair. Doubters always warned that another technology might supersede NFC before it got off the ground, and that may be a real possibility now with a major player like PayPal focusing instead on Bluetooth Low Energy (BLE) payment concepts like PayPal Beacon.

PayPal, which so far has skirted NFC for its own digital wallet, in September laid out plans to deploy Beacon so any store running a PayPal-compatible POS system, such as MICROS, NCR, ShopKeep and Leaf, to name a few, can plug a PayPal Beacon device into a power outlet, enabling transactions from mobile apps within a store without a Wi-Fi or mobile network connection. PayPal Beacon automatically recognizes the presence of devices with its mobile app, PayPal says. Walking into the store will trigger a vibration or sound to confirm a successful check-in, which happens in milliseconds, according to PayPal. A participating customer’s photo appears on the POS screen and paying requires only a verbal confirmation to the checkout clerk. PayPal will begin piloting Beacon-enabled purchases in stores during the fourth quarter of this year, according to PayPal President David Marcus.

Analysts note Apple also has the opportunity to similarly deploy its iBeacon Bluetooth technology, which is part of Apple’s new biometrics-equipped  iOS7 operating system, along with Airdrop, another new Apple feature. “Between Airdrop and iBeacon, Apple has all the components needed to offer a similar service to PayPal’s Beacon solution, and with the fingerprint reader they can add extra layers of convenience and security,” observes Oglesby.

As BLE evolves it will likely compete with NFC phones and attachable NFC tags and stickers, Bareisis notes, but he adds that while BLE devices cost $30-$50 each, merchants would need relatively few of them.

The expansion of available offers through Google Wallet’s revamped app is a significant development, Bareisis agrees. And while the future of NFC-based payments may be growing cloudy, the integration of BLE technology could be revolutionary for increased usage of various types of mobile wallets if it takes hold widely, he suggests.