Discover Financial Services and Google may be developing a partnership that would provide a “new way” to use Google Wallet, which today works primarily through Near Field Communication technology and a virtual MasterCard account.
Discover may white-label a version of its network to provide cloud-based mobile payments to Google, according to research analysts at Barclays.
“[W]e believe that a partnership between the two companies may be on the horizon,” lead analyst Darrin Peller wrote, adding that the arrangement would likely mirror Discover’s partnership with PayPal to provide its network as a conduit for PayPal’s digital wallet transactions.
The report says that Discover is seeking to “white label its network with multiple partners in order to enable greater ubiquity of emerging payment technologies amongst its merchant base,” and cites recent comments from Google officials about upcoming changes to its mobile wallet.
Perrin added that “the fact that both Discover and Google said they cannot say anything about a potential partnership when asked about it” at a recent trade show is perhaps the most revealing indication that a future Discover/Google initiative is in the works.
A representative from Discover declined to “speculate on future deals.” Google representatives did not immediately respond to a request for comment.
The Barclays note doesn’t offer any insight into how a potential Google/Discover initiative might work. But it says a “key theme” discussed by officials at Google and other companies involved in mobile payments is the need for cloud-based systems—or other alternative systems like quick-response (QR) bar codes—to bridge the mobile-payments gap until NFC-enabled devices become more ubiquitous among both consumers and merchants.
“While most companies in the industry maintain that an NFC-based payment system is likely to emerge as the standard mobile technology system…the consensus view is that it is likely to achieve ubiquity in the market as a result of the natural re-terminalization cycle over the next 3-5 years,” the note reads.
Google Wallet currently uses NFC technology to conduct transactions between mobile phones and point of sale terminals. Most card partners of Google, including Discover, allow consumers to link their accounts to a virtual MasterCard account issued by The Bancorp Bank.
Announced in August, the PayPal/Discover initiative will utilize a new transaction type separate from credit and debit to handle PayPal digital wallet transactions at more than 7 million U.S. merchants next year. PayPal’s system allows consumers to use a plastic card to access their PayPal balances, but the card isn't actually required—a simple phone number and PIN are all a merchant needs.
Discover was also the first network to partner with the Isis mobile payment venture, which launch its tests in Salt Lake City and Austin, Texas this week.