AllThingsD said the change of plan was included in a memo that also announced the departure of Google Wallet head Osama Bedier. The report cited sources who said that “Google CEO Larry Page abruptly killed the card launch plan after he was displeased with a glitchy run-through last week. He had long been skeptical of a physical card solution, with several sources saying he felt it did not press forward innovation as payments startups like Square have done.”

Google Wallet has also been hampered by its lack of partnerships with mobile carriers and platforms. It is available through Sprint, Virgin Mobile and some other carriers on select Samsung and LG phones but is not supported by Verizon, AT&T or T-Mobile, and does not work on the iPhone.

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But a few high-profile failings have shown that the company is indeed mortal, most recently with the high-profile implosion of Maps, or the ill-fated Ping – Apple’s half-hearted attempt to shove social networking into iTunes that was mercifully cut short (in favor of integrating Facebook and Twitter).

Before weighing in on Passbook’s fate, let’s first look back at some other potentially disruptive digital commerce technologies in the past –both successes and failures – to determine what crucial elements will be required to hit critical mass with consumer adoption.

The Losers

Let’s start with the losers. Remember Flooz? (No? Exactly!) The late ’90s dotcom paid precious startup cash to Whoopi Goldberg to promote an alternative currency to be used just on the Internet, but it was offering a solution to a problem that didn’t yet exist. The need for an alternative form of payment online was simply not clear to consumers at the time. It failed to attract merchants and users and was eventually shut down after about two years amid a bankruptcy filing.

More recently Facebook – certainly another obvious pick for assured front-runner status – killed off its own high-profile foray into virtual currency. After three years of trying, the company unceremoniously shut down Facebook Credits in June, opting instead to focus on beefing up its payments capabilities.

And then there’s Google’s efforts to do away with the physical wallet. While it’s too early to dub it a loser, the company has been tight-lipped with data around transactions processed via Google Wallet. And continued media coverage points to slow adoption, and leads to questions around its necessity. While the wallet-free concept is appealing on the surface, the rub it seems is that the effort on the part of the merchant is complicated and costly.

The Winners

PayPal was among the earliest contenders to seize on a market opportunity that many major credit-card companies and traditional commerce outlets missed (or underestimated). By providing an easy way for people to pay online without having to sacrifice time or security, PayPal offered a simple solution for a problem that was emerging alongside the rise in e-commerce and especially online peer-to-peer marketplaces like eBay. PayPal will now try to extend its reach offline having partnered with Discover Financial Services and multiple retailers, including Home Depot and Barnes & Noble.

Another standout market transformer – which, notably, primarily benefits merchants – is Square. Using a postage stamp-sized dongle, Square has significantly expanded the offline commerce market by enabling anyone with a smartphone to sell anything, almost anywhere and anytime. Its traction has been measurable, and it recently announced that it is already processing more than $10 billion in payments a year, with some three million merchants using its service. A recent deal with Starbucks should help propel user adoption dramatically.

If it’s not broken…

The key with both winners is ease and convenience — both PayPal and Square require little effort on the user’s part, but offer high value in return. PayPal builds on something most people are already using, namely online commerce , but adds the critical element of security.

And Square requires a fraction of the investment on the part of the merchant compared to traditional POS card readers – which can cost $10,000 to $15,000 – and actually makes the transaction easier for all parties involved. Let’s also not underestimate the appeal of the ‘cool’ factor with Square. As an example, take your local food truck, which now has access to cutting-edge technology enabling it to deal with potentially more customers; consumers benefit by simply being able to quickly sign their bill with a finger and receive an instant email receipt. Because of these ease-of-use advantages, Square has exploded while mobile wallets have at best lingered, with none poised to catch on.

Recently, I attended the Money 2020 conference in Las Vegas where attendees and speakers were providing a reality check on the state of mobile commerce. In one session, Jennifer Schulz, head of global product strategy at Visa, summed up the issue succinctly: “There won’t be mass adoption of mobile payments until there is a better consumer experience beyond the card.” I couldn’t have said it better myself. (Full disclosure: I work at edo, a card-linked offers provider).

Duplicative vs. Daring

Companies looking for innovative ways to engage with consumers, especially around mobile payments, should first and foremost focus on building solutions that are easy for all parties involved  ̶  consumers, banks and merchants  ̶  and that tap into a long-standing need in the marketplace. In the case of Passbook, the problem I see is that it’s not layering anything new onto my iPhone experience. To the contrary, my question about Passbook is why I need it, when I already have all the apps I want on my smartphone.

Even at this early stage of its functionality, Passbook should be more than simply an aggregator of digital cards and instead offer something truly unique. Currently, users must first download the brand’s mobile app (Starbucks, United Airlines, Sephora, and so on) and then connect the app into Passbook. Early users are finding this process confusing and duplicative, expressing frustration around the manual work needed to add different cards and services into Passbook, with limited return. In addition, the number of participating merchants is still very limited, and even those that exist often offer restricted availability. For example, McDonald’s has integrated with Passbook, but (curiously) only in France.

Passbook then is at best a novelty at this point. While there’s certainly the possibility Apple will revamp the app wholesale, and in turn gain meaningful traction, I’m more inclined to put my money on the bet it’s destiny is to join poor Ping in the ignominious Apple Graveyard. I think that nothing will replace ubiquitous credit and debit card payment systems until a service comes along that is a dramatically simpler solution, or offers compelling additional functionality that encourages people to leave their cards (and wallets!) at home. Given Apple’s dominance as the mobile device of choice around the world, Passbook has as strong a shot of success as anyone, but only if they figure out how to overcome these limitations. Until then, plastic will still be king.

Jeff Fagel is Vice President, Marketing and Brand Development at edo Interactive. You can find Jeff on Google+ and Twitter.

Photo courtesy of Shutterstock/Pressmaster.

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Android Police has a leaked version of Google Wallet sent by a tipster that shows information about an upcoming Google Wallet card, which connects to a Google Wallet account and can be used at traditional credit card point of sale terminals. The cards are pitched as a way to pay with Google Wallet at a location that doesn’t take NFC tap-and-go payments.

Now, we can’t verify the authenticity of the app or the screen shots from Android Police. I reached out to Google and a spokesperson declined to comment. And you could argue that an analog card isn’t in keeping with Google’s digital character. But the report makes some sense to me.

While Google has said it’s committed to NFC, it is also working to expand the uses for Google Wallet. It merged Wallet with Google Checkout, its online payment system a year ago and is now using it for payments online. And in August, it shifted Google Wallet to a cloud-based model, so it could directly support any credit or debit card. And today, Google announced Wallet is available for transactions on mobile websites. The company last week also said it was preparing a new version of Google Wallet and curiously asked users if they used an iPhone, which does not support NFC.

UPDATE: NFC Times also reported last month that Google was working on a co-branded payment card with Discover Financial Services though Google has not confirmed any details about the card. (original story follows)

Google has struggled with Google Wallet, getting an estimated 50,000-100,000 downloads of its app earlier this year. The problems stem from the fact it hasn’t gotten support from Verizon, T-Mobile and AT&T, which are backing Isis, a rival mobile payment joint venture. Also, its dependence on NFC for in-store payment limits its reach to about 200,000  stores that have upgraded their hardware to handle contactless NFC payments.

If Google introduces a card — which would connect to a Google Wallet pre-paid balance or pre-loaded debit and credit cards — it can get around all of those limitations and hit millions of locations. And it also lends more credence to the idea that cards are not dead by a long shot, no matter how many next generation mobile payment tools we throw at it.

PayPal has made its pre-paid card a big part of its in-store payment initiative, which it will use as part of a big partnership with Discover next year. PayPal has pitched itself as more of a digital wallet, something Visa with V.me, American Express with its Serve product, and others are doing as well. Google Wallet could become more of a broader payment tool that uses NFC when available but lives in a lot of different forms, as an online tool for e-commerce transactions but also potentially uses QR codes, barcodes or other methods at certain physical stores. Google will still get its money from serving up offers and discounts.

The Andoid Police reports says that users can swipe their Wallet card and their default payment card on file will be charged unless users select a different source through the Google Wallet app. Users would get instant notifications of their transaction through the app. And they can still apply offers on card transactions. The Wallet is also getting additional features like the ability to withdraw funds from a wallet balance, send personal payments and also handle transit cards, according to Android Police.

There’s no information on when this would become available. And again, we have to wait to see if this report proves true. But it makes sense to me. Payments don’t take any one particular form. There’s no reason why Google Wallet couldn’t manifest in a card.

Images courtesy of Android Police

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What’s interesting is that when you sign up for an invite, the site asks what kind of device you use: Android, iPhone or other. It’s unclear what that means for Google Wallet, which up until now has been based on near-field communication for mobile payments. NFC payments require a chip inside devices to complete tap-and-go transactions.

It could mean that Google may be pursuing a more cloud-based approach to payments that doesn’t require NFC for transactions. Or Google Wallet could integrate with Apple’s Passbook or evolve to support QR codes or 2D barcodes, which is how Starbucks and Dunkin Donuts handle mobile payments. Or it could just mean Google wants to know how many iPhone users are interested in Google Wallet. Currently, the iPhone doesn’t support NFC and Apple decided to keep the technology out of the iPhone 5, dealing a symbolic blow to the short-range wireless technology.

The reliance on NFC has been problematic for Google Wallet, which launched a year ago but has only been able to get support on select Sprint and Virgin Mobile devices. On Monday, Google announced it is now expanding support to Galaxy S III devices on MetroPCS. Google has had little luck in getting support on phones running on Verizon,  AT&T and T-Mobile, which on Monday finally launched a competing mobile payment system called Isis that also relies on NFC. Google may finally get Verizon, AT&T and T-Mobile to allow Google Wallet on their phones but it’s unclear when that will happen.

Google’s VP of Wallet & Payments Osama Bedier, reiterated his support for NFC last week saying it was still easier to use than QR codes. He predicted that NFC will grow in popularity in the coming years and “NFC chips will replace bar codes.”

So there are not a lot of answers right now but it makes sense for Google to try some new approaches. In August, it also opened up Google Wallet to allow any card to work with the payment system. But it still faces challenges in Wallet adoption, even on existing Android phones. I’m not sure what iPhone support would look like but any additional momentum for Google Wallet would be welcome at this point.

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This news shows that not even the credit card companies have figured out yet which mobile payment standard will eventually be adopted. Like other major card providers such as MasterCard and Visa, Barclaycard is supporting both Google Wallet and Isis, which is a payment system created by Verizon Wireless, AT&T and T-Mobile. Barclaycard announced Isis support this past February, alongside Chase and Capitol One.

Of course, neither wireless payments system, which use near-field communications chips, is a guaranteed winner. The lack of an NFC chip in Apple’s new iPhone 5 suggests that mainstream consumers may opt for app-specific payments — such as that found in the Starbucks app — or through Apple’s new Passport app in iOS 6, which currently supports digital coupons and loyalty cards.

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Dua said Google wants to “electronify” all kinds of credentials, cards and tickets, everything from boarding passes and concert tickets to identification and gift cards. That would make Google Wallet a central hub for users that they can turn to regularly.

“That’s the goal. We want you to be able to leave your leather wallet at home and carry your phone and transact with that as your primary transaction device,” Dua said.

This is not exactly new for Google. It advertised Google Wallet’s launch last year with a commercial featuring Seinfeld’s George Constanza and his comically fat wallet. And the company talked about the larger vision of Google Wallet, to hold all kinds of information. But now, it looks like Google may be closer to doing something about it.

Accepting more credentials would pit Google Wallet against other services like Apple’s upcoming Passbook, which will allow users to store boarding passes, reward cards and movie tickets. Lemon, an app that tracks receipts, also expanded its focus and introduced a Smarter Wallet concept, allowing users to store cards, receipts and coupons on their phone. Microsoft is also working toward a similar goal with its Wallet Hub for Windows Phone 8, which will incorporate NFC payments and store deals, loyalty cards and other credentials.

It’s unclear when Google will actually broaden the focus of its Google Wallet. But it’s not surprising. The idea of a wallet is not limited to payments and we’re seeing that there is also value in recreating the other roles that a wallet serves. In fact, payments today is not that bad of an experience for many users. Offering an app that replaces a credit card or cash has only so much appeal, especially when it’s limited to a subset of devices and merchants. But being able to digitize a lot of the other things in a wallet makes the whole proposition of a mobile wallet app more valuable.

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Any credit or debit card issued by Visa, MasterCard, American Express or Discover in the U.S. can now be registered with Google Wallet. When it launched, you could only connect Google Wallet with a Citibank MasterCard, or buy a prepaid Google card.

Google explained how the process will work in a company blog post:

When you shop in-store, you can use Google Wallet in conjunction with your selected credit or debit card for purchases (more info here). Shortly after making a payment, you’ll see a transaction record on the phone with the merchant name and dollar amount. You can now view a history of all your in-store and online purchases from the online wallet.

Google has also changed how it stores credit cards — the Wallet info is now in the cloud, as opposed to on the phone. So when you register, say, your American Express card number with Google Wallet, you’re actually paying with a virtual prepaid card from MasterCard, which is stored in the secure area of the phone. That virtual prepaid card is actually funded by your American Express card — or whatever card you choose to use, and you’ll see the charges show up there.

And just in case the phone is lost, users can visit their online Google Wallet account and disable it, and Google will stop authorizing any charges made after that.

Google Wallet payments are accepted at 200,000 locations, but the list of devices equipped to handle these payments still very short: Galaxy Nexus, LG Viper, LG Optimus, HTC Evo 4G, Samsung Galaxy S III, and most recently, the Nexus 7 tablet. However, being on the Galaxy S III is looking like a good strategy for introducing Wallet to a large audience: Samsung has sold 10 million of the Android smartphones in just under two months.

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The Optimus Elite is a successor to last year’s Optimus V. I reviewed a variant of that device and found it to be a solid performer for the then $149 price tag. At the same cost, the new Elite offers a few welcome upgrades: a faster 800 MHz processor and 5 megapixel rear camera with a flash and video capabilities to name a few. The 3.5-inch display is still just HVGA, or 480 x 320 resolution, however. Virgin Mobile and LG are supplementing the on-board storage with 50 GB of free cloud capacity through Box.com.

NFC may be the biggest new feature here, however. Google is struggling to gain customers for its Google Wallet service as another carrier-backed group consisting of AT&T, T-Mobile and Verizon Wireless are preparing an alternative mobile payment system dubbed Isis.

Until now, most NFC-based Google Wallet phones were expensive, higher-end handsets. For $149, Sprint, Virgin Mobile and LG are putting wireless payments in the hands of the pre-paid user base at a reasonable cost. Will it help Google Wallet win out over Isis? Probably not, but if nothing else, the LG Optimus Elite will at least raise awareness for mobile payments before a whole new audience.

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The $199 price tag is currently $100 less than Verizon’s model and Sprint is sweetening the deal even further, thanks to its support for the Google Wallet mobile payment service. New Galaxy Nexus owners who activate a Google Wallet account within a week of phone activation get a $10 Wallet credit. That’s standard fare for all Google Wallet owners, but Sprint will add an additional $40 credit within three weeks. Here’s a short video to show my first Google Wallet purchase worked on the Nexus.

Aside from the native Google Wallet support thanks to Google’s software and the integrated NFC, or near-field communications chip, Sprint’s Galaxy Nexus feature set and hardware looks to be the same as Verizon’s: 1.2 GHz dual-core chip, 4.65-inch 1280 x 720 Super AMOLED display, 5 megapixel camera and Android 4.0 in a “Pure Google” experience. There won’t be custom interface or skin on the handset as a result.

I bought a GSM Galaxy Nexus overseas in November and it’s still my everyday Android handset. Sure there are phones with bigger or higher resolution displays, not to mention quad-core handsets on the way, but I keep turning back to the Galaxy Nexus for that pure Google experience. It’s vastly improved from smartphones that run Android 2.3 and with $50 in credits, I suspect Sprint will sell a good number of these new handsets.

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