Attach Your Company to Google Mobile Payment? Wait for These Companies First

Cory Bennett

Google has been generating most of the recent buzz in mobile payments. The search engine giant’s Android app, Google Wallet, is set to launch this summer and give users the ability to pay with credit and debit cards by swiping their phone at checkout. The app – available for Sprint users with Citibank MasterCards on the Nexus S 4G phone – will beat its main competition, Isis, to market. Isis, the combined mobile payment effort of Verizon, AT&T and T-Mobile USA, is eyeing a limited roll-out in the beginning of 2012.

While Isis bides its time, content to leak its plan in a trickle of announcements, Google announced its arrival in May, only months before its actual release. Some question the value of the company’s timing, though. With a limited network and partners, there are few benefits to entering the market first. Google may struggle early, while prepping the market for others to swoop in later.

The triumvirate of Verizon, AT&T and T-Mobile – which includes the nation’s top-2 mobile carriers – has remained coy on its intentions regarding compatible phones for Isis and the program’s retail, bank and credit card partners.

Conversely, Google has hitched its wagon to the No. 3 mobile carrier in Sprint and the Nexus S 4G phone, while limiting its initial reach with the Citibank-MasterCard partnership. Only 15 retailers – despite big names such as Subway, Macy’s and Toys ‘R’ Us – have thus far partnered with Google Wallet.

Perhaps other banks, credit cards and retailers will gravitate to Google Wallet when they see the app’s early success in an unrivaled field. With the app’s tiny initial reach, though, (not to mention the dearth of the Near Field Communications (NFC) devices required for mobile payment) there is a good chance that Google Wallet will suffer pitfalls common with technology early adopters. Competitors – primarily Isis and PayPal, but also payment start-ups such as Venmo and Square, and heavily rumored apps from Apple, Microsoft and Nokia – will take notice of Google’s shortcomings and potentially enter a more robust market with valuable lessons learned at Google’s expense.

Google called Google Wallet a "game changer," and "one of the biggest investments we’ve made at Google for a very long time." The most notable aspect of Google’s bravado, though, is its proclamation, "We’re committed to NFC at Google." One of the main barriers to mobile payment implementation is the lack of NFC devices around the country. With the weight of Google behind NFC, however, the network will spread. While competitors incubate, the network will grow to one that consumers are more used to.

But ubiquity will not allay consumers’ concerns.

Currently, not only are mobile transactions unusual, they are actively avoided by consumers. An Econsultancy study found that nearly half of consumers had poor experiences during a mobile engagement. Only a third even found the mobile channel relevant. In the UK, a Tealeaf study found that of the consumers who conducted a purchase through a mobile channel, 83 percent faced some type of issue, most often in the payment process. This reveals an underlying mistrust regarding payment and mobile devices.

And retailers aren’t doing much to help. A separate Econsultancy study noted that only half of retailers surveyed have plans to invest in the mobile channel in the coming 12 months.

Security experts also remain dubious of the Google Wallet’s safety – a large reason why Google enabled only one phone for Google Wallet. The Nexus S has a unique chip, separate from the phone’s operating system and hardware, which stores the phone owner’s credit card information. This separation allows for cryptography and memory protection technology to create a "Secure Element." Google Wallet also requires a 4-digit pin, adding an extra layer of protection against people nearby using NFC to swipe credit card info.

But security analysts remain concerned. Some worry that the four-digit pin could get dropped to increase expediency of payment. Others fret over the ease of reverse-engineering technology on Android’s open platform. Still others simply conclude that mobile devices, as one expert put it, "fundamentally can never be trusted."

Enter PayPal.

The online payment company faced security concerns early in its existence, but has grown to become one of the most trusted forms of digital payment. The company immediately sued Google after the announcement of Google Wallet, claiming two former PayPal employees hired away by Google to head its mobile payment project illegally used trade secrets regarding mobile payment technology.

If PayPal succeeds in slowing Google Wallet’s rollout, it could leverage consumer confidence in its services to fill the mobile payment void.

But with so many players vying for a piece of the pie, the only sure thing is that the market will experience more seismic sifts before a frontrunner emerges.