Emerging Payments

Mainstream Use Of Google’s Mobile Wallet Won’t Be A Simple Tap Dance

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Merchants that want to accept payments from Google Inc.’s mobile wallet must go through a few more steps than simply enabling customers to “tap and pay.”

When Google unveiled its mobile wallet last week, it stressed that it would work with existing technology, including MasterCard Worldwide’s PayPass contactless payments system (see story). But according to the country’s largest terminal maker, the process is not that simple.

The consumer appeal of mobile wallets such as Google’s is that they provide extra functions, such as digital coupons, that merchants need to support. “If it’s just tapping versus swiping, this will all go down as a big publicity stunt. There has to be something more interesting going on here,” Douglas G. Bergeron, VeriFone Systems Inc.’s chief executive, said in an June 1 interview.

The added functionality of redeeming loyalty rewards at the point of sale and tracking customer transactions will demand the added software. VeriFone has been working with Google throughout the development of Google Wallet, Bergeron said.

Google’s mobile-payments system will use smartphones, starting with the Nexus S, a phone manufactured by Samsung Electronics Ltd. and sold by Sprint Nextel Corp.

The Nexus S is the only phone running Google’s Android operating system that has an embedded Near Field Communication chip that could support payments and merchant loyalty-point or coupon collection and redemption at the point of sale.

But for these new wallets to succeed, merchants must see the need to make the additional investment, analysts agree.

“It’s a conundrum. I’d say hardware is even worse than the software,” says James Van Dyke, president of Javelin Strategy and Research of Pleasanton, Calif. “We are talking about several hundred dollars, maybe thousands of dollars, for every one of those registers.”

Another issue is whether retailers should ensure consumers can get a clear wireless signal at the register to enable them to check their balances and access their digital coupons.

“Merchants have really wanted to be involved in the payments process, and it’s a perfect case of ‘be careful of what you ask for,’” says Brian Riley, a research director in the bank cards practice at TowerGroup. “It’s going to absolutely involve that the merchants put a little more skin in the game to get the added benefits.”

When Google launched its mobile wallet, it did not explain “how much work, how much software, how much testing, how much integration, how much back-roots regression testing went on to make this happen,” Bergeron said.

This same amount of work went into “every one of these wallets that is coming out,” he said. “There is code that has to be written to interoperate with the rest of the payment stuff.”

VeriFone is modifying the aesthetics of its terminals to better encourage the use of mobile payments, Bergeron said.

“Merchants don’t want coily cords. They don’t want to turn their countertop, which is the last moment in time with the customer, [into] what looks like a junkyard,” Bergeron said.

In December, the company said it was planning major investments in payment terminals with built-in contactless readers (see story).

And in October, VeriFone modified its PayWare Mobile device, a card reader that works with Apple Inc.’s iPhone, to facilitate mobile payments from customers of PayPal Inc., a unit of eBay Inc. (see story).

VeriFone announced a separate deal in September with the mobile-payments company Bling Nation Ltd. under which the terminal maker plans to use its reseller network and payments gateway to extend point-of-sale acceptance (see story).

“We have had lots of meetings with PayPal over the last year,” Bergeron said. “We were meeting with PayPal back when [Google executive] Osama Bedier was at PayPal.”

Mobile payments will have a slow adoption, in sharp contrast to what the companies behind such technology have promised, experts say.

“The newbies, the Googles of the world, [are] smart people, but they always imagine as if somehow next year everything is going to change,” Van Dyke says.

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