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Summary:

Pouring money into Google Wallet is getting Google nowhere. Slow adoption, reluctant phone carriers and lack of enthusiasm for NFC are weighing heavy on the mobile payments trend, and something’s got to give.

Google Wallet
photo: Google

Today, a report from Businessweek showed the cracks in one of Google’s most spirited and cutting-edge products. Google Wallet, it seems, is a “money pit.” The team is now forced to make tough decisions about how to move forward with the product, potentially scrapping projects designed to encourage digital wallet adoption.

It’s been a rough few years for the digital wallet space in general. Smaller companies like Dwolla and LevelUp have a hard time reaching out to educate their audience and expand their consumer base, according to a study by ComScore. PayPal, with the most name recognition out of all, has investors unsure of success in the onsite payments business according to Mercury News. Even buzzy payments provider Square, boasting of processing mobile transactions upwards of $8 billion per year, has only 3 million Square Wallet users as of last year, according to CNET. But perhaps no company has felt the squeeze quite like Google.

The search giant has already sunk $300 million into acquisitions to supercharge the technology and edge ahead of competitors, but the reaction to the service has been lukewarm at best. Wallet has been downloaded from Google Play fewer than 10 million times in the last two years, which means it is dwarfed by an order of magnitude by Google’s other offerings — even the recently released Hangouts app.

Even those who download digital wallet apps like Google Wallet use them sparingly: Only $500 million in transactions went through U.S. stores and services via mobile payments in 2012, and roughly $12.8 billion worldwide. A lot of the trouble with digital wallets has to do with inconsistency among retailers, and the lack of widespread information about when and where the public can even use an app like Google Wallet. Until most stores accept mobile payments as quickly and simply as handing over cash or swiping plastic, there’s not going to be enough volume to push Google Wallet in the black.

The other significant barrier that Google Wallet faces is a lack of cooperation from the carriers. While a decent amount of Android, Blackberry and Windows Phones have NFC enabled in their hardware, only Sprint allows Google Wallet on devices. Having to battle with other carriers, on top of other wallet companies and Apple, with its own forays into Passbook, will further stretch Google Wallet as it struggles to find a steady audience that has access to the product.

Like many of its now-shuttered projects, Google Wallet may have entered the mobile-payments market too early and too strong to make a real play at domination. Forrester Research estimates the space will hit $90 billion by 2017, but that’s a long time to wait and see if a major investment will turn around — even, perhaps, for Google.

  1. Frill Artist Friday, June 7, 2013

    I use Google Wallet all the time on my Nexus 4 and love it. The looks on people’s face when I simply tap to pay is amusing to say the least. A guy behind me at a grocery store asked, “Is that an iphone?”. “No” I replied “It’s an Android”.

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    1. I’ve had that very same experience a few times now — and it never gets old! “Is that an iPhone?” You have an iPhone in your hand, can you do this? I think not. Mainly I carry a single bank card for my normal spending, but with Google Wallet I can always use one of the other cards in my repertoire without having to plan on it.

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  2. Brian Roemmele Friday, June 7, 2013

    Lauren,

    Great posting! Your points are spot on.

    I must say, the ultimate cloud wallet, built by a company with a market value of perhaps $8 Billion dollars with a high profile founder, loved by the tech media and the popular press alike. With investors that range from actors to high profile politicians, has to be considered here. This technology was designed by the hands of a great editor, creating and crafting the experience of the users to great detail. Some even compared the founder to be the most daring and innovative founder in tech. Millions of consumers signed up for this revolutionary service.

    The process was quite simple, you paid without any consumer technology at all. Thats correct, no smartphone needed, you paid with your finger, you paid by touch. PayByTouch was a spectacular try at the first cloud wallet and it was a spectacular failure. The failure was not just because of the scandal that later developed from the founder, it failed for perhaps a dozen reasons that I could write a book about. But one reason was “fixing” a payment system that was not perceived as broken by both merchants and consumers.

    Think of it, no smartphone, just your finger (you never leave home without it) and this multi-billion dollar company failed in a spectacular way.

    One issue that even the smartest tech companies suffer from is a complete lack of understanding of history. All of us in tech really want to believe that we are the disruptors inventing the new paradigm and thus history is given little to no respect. Even less attention is paid to those that have had direct empirical experience with these merchants and consumers and thus we will witness history repeating itself with every company you mentioned.

    All of the companies you have mentioned have of course have had a staggeringly low amount of uptake. When add the millions lost by Google and the millions spent on brand building, marketing and advertising it all starts to look very much like the dot com bubble.

    Are there ways to really innovate in this sector? Absolutely! Thus far we have yet to see this real innovation (useful to the 99% outside of the tech centers). There are about a dozen things consumers need today and about two dozen things that merchants need today in payment processing. To the wallet companies, I suggest a reevaluation of what problem is trying to be solved.

    I think that perhaps Apple will address some of these issues when they release the iWallet later this year. We will see the integration of the Authentec fingerprint reader as a replacement of the iPhone Home Putton with a number of extensions to Passbook that just about everyone would see as a paradigm shift in wallets and payments in general. Will it be enough? Perhaps. Perhaps Apple will once again tap an unrealized and simultaneous unmet need with shocking results.

    If any company has a chance, even without the very missed Steve Jobs, Apple has that chance. In any case, we will know shortly.

    http://www.quora.com/Brian-Roemmele

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  3. digital-wallet business is popular in Japan. It require the software company Telecommunications bank and shop deeply teamwork.

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  4. Reblogueó esto en gabriel catalanoy comentado:
    The other significant barrier that Google Wallet faces is a lack of cooperation from the carriers. While a decent amount of Android, Blackberry and Windows Phones have NFC enabled in their hardware, only Sprint allows Google Wallet on devices. Having to battle with other carriers, on top of other wallet companies and Apple, with its own forays into Passbook, will further stretch Google Wallet as it struggles to find a steady audience that has access to the product.

    Like many of its now-shuttered projects, Google Wallet may have entered the mobile-payments market too early and too strong to make a real play at domination. Forrester Research estimates the space will hit $90 billion by 2017, but that’s a long time to wait and see if a major investment will turn around — even, perhaps, for Google.

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  5. Who does google have to fight in order to succeed…
    1. Competitors – Apple, PayPal, Blackberry, Square, Microsoft and more
    2. Carriers – They want most of the revenue
    3. Card companies – They want most of the revenue
    4. Merchants – who have to pay for the new terminals. Please note that the card associations are making them buy terminals over the next year or so to accomodate chip cards.
    5. Hardware makers – there is no agreement as to how to implement any type of wireless payments (NFC, RFID) or where to implement it (in the handset, on the SIM card, on an SD card).
    This fight has been going on for over 10 years. When it’s resolved, the clock will start on a 5 to 7 year consumer adoption curve.

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  6. Soodesh Beegun Saturday, June 8, 2013

    I believe that it is all about consumer acceptance of this technology. Most of the cases where technology is introduced, people remains in a wait and see position,until others adopt and use, some will not even try. Product differentiation is also a factor – how different is Google wallet from Paypal, If I am a Paypal user, what will make me move to Google Wallet. The role of intermediaries is also important – all stakeholders should play their roles.

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  7. Douglas Finley Saturday, June 8, 2013

    Consumers especially retailers do not move at Moore’s law. Instead of Google Wallet being some fancy NFC related tap to pay technology….they should have just created a real physical debit card. It could have organized expenses easily and used the payment information to offer discounts to people in a clean simple interface.
    Get into people’s physical wallets first….then you get into their digital wallets.

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  8. Too funny, Apple getting flak for not pushing into mobile payments faster and harder. Lack of acceptance and chaos in the infrastructure perhaps…

    They have proven that a market can be up ended and the entrenched players dethroned. Build a better mousetrap and they will come.

    This is not to say they will do it, you don’t have to be first, just better than the other guy and have good timing.

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  9. why not analyse some real wallet stories and get some statistics on models like O2 Money? They recognised that it wasn’t about NFC to start, but is about content. Not quite the approach of Google in any iteration!

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  10. This is what you get when you enter into a business with no passion and only for the money. None of them will make it. It will be the smaller companies driven by the real reason why this should be done.

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