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Square, the Google Wallet exodus and NFC

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Square's Jack Dorsey at GigaOM RoadMapEarlier this morning news broke that Rob von Behren, co-founding engineer of Google Wallet was leaving the web giant and was joining Square, the San Francisco-payment company co-founded by by Jack Dorsey. Already many are wondering if Square is going to support near-field communications (NFC) in the near future?

The right question is — what is going on at Google Wallet? Earlier in the year, Jonathan Wall, another Google Wallet co-founder and his colleague Marc Freed-Finnegan left Google to start Tappmo, a startup focusing on mobile commerce. That senior guys like Wall and von Behren are quitting shows that something seriously has gone awry at Google Wallet, something the NFC Times outlines in great detail on their blog post.

As for Square, the company is pretty clear about its attitude towards NFC. Square COO Keith Rabois has been pretty blunt about why he (and Square) find NFC of little value. At our Mobilize conference in September 2011, Rabois remarked: “I’ve never met a single merchant in the U.S. who says I want this NFC thing.” The harsh assessment of NFC came six months after Rabois in an interview remarked: “We are waiting for folks to come up with compelling NFC apps. And if NFC does become popular, we can bake it into our product as well.”

With one in five smartphones likely to support NFC by 2014, many large companies however are signing up for NFC. However, in the real world, NFC-based payments are still a rarity despite Google’s big marketing push. In one of his many posts on the mobile payments industry, my colleague Ryan Kim argued that NFC will driven by marketing and loyalty and not payments.

Going back to Google Wallet, the search and mobile giant needs to quickly figure out how it is going to gain traction in a business that is attracting all sorts of competitors — from PayPal to phone companies to Square and even Google’s former employees.

Update: Google says it has acquired New York-based TxVia, a payments company.

we’re thrilled to announce that we’ve acquired payments technology company TxVia to complement our payments capabilities and accelerate innovation towards our full Google Wallet vision. TxVia is a technology pioneer that offers a fast, flexible and highly reliable payments platform—which we believe is one of the best in the world.

Since 2008, TxVia has supported the management of more than 100 million accounts. They’ve partnered with the industry’s best known brands, and their leadership team has played an instrumental role in defining the fast-growing prepaid card segment of emerging payments. In this time, TxVia has also certified and directly connected to the major payment networks, which establishes a solid foundation for Google Wallet and our partners to drive innovation on a global scale and in a partner friendly way.

11 Responses to “Square, the Google Wallet exodus and NFC”

  1. Derek Kerton

    Rabois remarked: ”I’ve never met a single merchant in the U.S. who says I want this NFC thing.”

    In an era that we lionize Steve Jobs, this Rabois quote is about as anti-Jobsian as it gets.

    The fact is, merchants are neither technologists, payment experts, nor futurists. They have no idea what is good for them in the future. Their preference will, almost invariably, be for the status quo. A few creative “free thinkers” will want some subtle improvements in the status quo. Merchants simply have other things to worry about, such as whether to put the yellow sweaters at the front of the store, or the blue shorts.

    And I’m not making fun, or trivializing the merchants, either. It turns out, the choice between yellow sweaters and blue shorts DOES MATTER, and this is where their skills focus, not on NFC.

    Any mobile payment or NFC expert who relies on asking merchants what they want is going to have clouded vision. Don’t get me wrong, the merchants are extremely important stakeholders in whatever solutions emerge, but all we need to consider is their needs and incentives. Then, the tech innovator community must conceive and build innovative solutions that do a better job meeting those needs, and aligning with the incentives enough to ensure a merchant “willingness” to adopt.

    You don’t ask a Blackberry user in 2006 what they want in their next smartphone — You build an iPhone and show it to them.

    You don’t ask a VCR user in 1998 what they want in their next video recorder — You build a PVR and show it to them.

    I went off on a odd rant here, because despite what Rabois said, Square doesn’t appear to follow his own logic. Square is innovative in a way that merchants would never have requested.

  2. Derek Kerton

    While I agree with Rabois that, so far, NFC appears to be little more than a minor improvement over Plastic, with substantial ecosystem challenges, cost, and technology hurdles, I still see NFC having some long-term value.

    You see, when NFC is merely a replacement for a credit card, it is (at most) a 2x improvement, but nothing like the 10x improvement that is needed to tip such a cultural change as how we pay.

    It is when NFC starts to have multiple uses that it will reach 10x value. That will be when NFC can pay for a latte, and also open a hotel room. Start your car, swap your business card, look up product info, follow someone/thing on Twitter, pay for public transit, pair Bluetooth or Wifi or other secure local connection, activate a smarthome profile for heat and lighting, track employees or kids, etc, etc. You put all that into the same NFC chip/platform and you get well beyond 10x value.

    Of course, the number of interoperable pieces in that puzzle is why the ecosystem challenge is so great.


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  4. Rakesh Agrawal

    Don’t forget that Google pushed aside Stephanie, a high profile exec brought in from PayPal to lead up Google Wallet. (One of the two they were sued over.)

  5. I seem to recall that in PayPal’s early days they paid users to join (maybe $10?) and also gave user’s cash for referrals (another $10?). Maybe Google should follow this tact. Right now what incentive is there for me to start using NFC? Also, providing free devices to stores might help (ala Square).

  6. Google is getting desperate at this point – Commerce/Payments has eluded them for several reasons in the past few years. First they went the build-your-own approach, then went on to poach from competitors (questionable choices on the picks though!) and now trying to buy smaller players e.g. SocialGold,Slide – both mostly failed in terms of IP as well as people and now TxVia.

  7. Have you guys heard about stock options? Anyone even Google engineers can at anytime feel tempted to join another company that some circles of wall street investors think may be worth Billions of dollars. Anyone can be tempted to get a $40 million or however hugely much is promised as stock options when you can use your Google cred to land a big role at such a company. Exact same thing happens with Google people going to Facebook, Twitter, Groupon, whichever other silicon valley startup or small company that may have a chance of convincing some wall street investors that they should be worth Billions of dollars.

    I don’t think Square is worth anything. And I think FAcebook and Twitter are pretty much worthless. The Google engineers that land those jobs with huge stock options may agree with me. But they don’t care if the companies actually make something useful for society or actually have a long term vision or anything like that. All they care about is the probability of them making tens of millions of dollars over just a few months. All they basically have to do is accept the job. They don’t actually have to actually do anything, they may as well make it look like they are working on something new, but in basic terms, they signed up to become multi tens of millionaire overnight when they decided to take the job. Or it also can turn out the company does scare investors somehow and does not become big, that’s their gamble.

    Google should not try to bribe those engineers with huge bonuses, they don’t have to try to compete. Paul Buchheit made $100 million doing his own thing to sell to Facebook. And the Google Wave guys also probably have $40 million each or maybe even much more in Facebook stocks once it goes on IPO. Good for them.

    But stop blogging about this being an exodus. This has got nothing else to do than a big pile of money.