The Google Wallet has officially gone live in the US, allowing Nexus S 4G phone users on the Sprint network to pay for transactions in store with their mobile handset.
Making use of near-field communication (NFC) technology, the Google Wallet combines Google Offers, as well as multiple credit cards, loyalty programmes and special offers, at the point of sale. The service comes with support for Citi MasterCard and Visa card users.
The Google Wallet functions by allowing users to link their credit card or Google Debit Card to the mobile app. Users can then tap their phone or card on a PayPass-enabled terminal to make a payment. Safeguards in place include a PIN and a spending limit.
Google says companies such as Subway, Bloomingdales and Macy's are already part of its pilot Google Wallet programme.
The payments system was unveiled in May, and the announcement was followed swiftly by a lawsuit filed by PayPal against Google. PayPal argued that two of its former executives, both now working for Google, shared trade secrets with the search giant.
According to reports, PayPal is now looking into launching an update to its own mobile app that will allow peer-to-peer payments via NFC.
Mass appeal?
While the ultimate goal of the Google Wallet is for users to replace their wallets with the mobile application, analysts say it will still be at least five years before the service is in the mainstream.
A recent Gartner report shows the mobile payments market is growing slower than expected - especially in developing markets.
Research director at Gartner Sandy Shen says in the report: “While developing markets have favourable conditions for mobile payments, such as high penetration of mobile devices and low banking penetration, this is no guarantee of success, unless service providers adapt their strategies to local market requirements.”
According to Shen, mass adoption of NFC payments will take at least four years. A number of hurdles will need to be overcome in that time, including changing user behaviour.
Resisting change
When the Google Wallet was first announced, CEO of FNB eWallet Solutions Yolande Van Wyk said she didn't foresee any real impact on traditional payment mechanisms for some time to come, especially in SA.
“If you think about it, the Google Wallet is simply changing the form factor used for payment at the point of sale. For people to take up a new technology they must have a real reason to do so, and I don't believe the necessity is there yet,” noted Van Wyk.
“We're still struggling just to get mass take-up on the use of debit cards in SA. We're seeing a vast number of people still withdraw all of their money after pay day and use cash for all transactions for the rest of the month.
“It will be a huge leap to get such people to adopt the use of a phone to make payments,” commented Van Wyk, adding that mobile payment via NFC in its current form is not a technology for the masses.
Ulterior motives
Gartner says money transfers and prepaid incentives will drive mobile transactions in developing countries - accounting for 54% and 32% of all mobile transactions this year respectively.
A Forrester research report on the launch of Google Wallet argues that Google's interest is not so much in mobile payments as it is in the data that underlies the chain of commerce - including transaction details, coupons and receipts.
“The longer-term impact is potentially much more significant and another sign that consumer product strategists need to anticipate the disruption created by new entrants in the payment value chain,” says Forrester.
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