Google Wallet is under increasing pressure — though the mobile wallet has been in consumers' hands for over a year, Google still has fewer issuer partners than its rival Isis, and with the Merchant Customer Exchange wallet on the horizon, Google now faces competition from the very retailers it seeks to attract.
To set itself apart from its competitors, Google is placing greater emphasis on the analytics and consumer data it can provide to the companies it works with.
"One of the things that we're trying to do is actually enable more cloud-based services for retailers," says Robin Dua, head of product management for Google Wallet, in a recent Google Payments Live video posted online.
"We're also enabling cloud-based tools that will allow retailers to create customized loyalty programs and … really get a great set of analytics that they can have access to," Dua says.
Google posted the video about a week after the Aug. 15 announcement of the planned Merchant Customer Exchange wallet being developed with the support of major retailers like Wal-Mart Stores Inc., Target Corp., Sears Holdings and 7-Eleven Inc.
Google, which launched its Google Offers system side-by-side with Google Wallet last year, has from the beginning talked up the value of such add-on services to mobile payments, says Gil Luria, analyst with Los Angeles-based Wedbush Securities.
"But they absolutely want to make sure retailers get what they want now so they don't create their own wallet," Luria says.
Google wants to make sure it can offer services similar to, or better than, what PayPal Inc. and Square Inc. offer to merchants and consumers in light of recent deals those companies have completed, Luria says. PayPal is working with Discover to expand its point of sale payment system, and Square announced a deal with Starbucks to process the coffee chain's transactions.
Google is working on incorporating geo-location technology to help merchants know when a specific consumer is in their store, or help consumers find locations accepting the Google Wallet, Dua said.
This echoes some of the work Square is doing with Starbucks and other retail partners to provide an alert when customers enter their stores.
Already consumers can use Google Maps to locate merchants they've visited previously.
"You can see all the transactions that you made using Google Wallet … [on] a map," Dua says. "It is a nice way to jog their memory about a particular retailer where they transacted … for those bar nights where you had a great time and you want to figure out where it was and you don't really remember."
Google's recent conversion to a cloud-based security system has also simplified the process of moving issuers' cards into the wallet, which previously relied on holding the card credentials in a secure element on the mobile phone, Dua says.
As such, Dua says Google will move faster in adding issuers and retailers than some of the competing wallets, including Isis, a joint venture of major telecommunications companies. Negotiating with each issuer under Google's old model can take six months to a year, Dua adds.
"There are 8,500 issuers in the U.S. and the [Isis] model is not scalable and it will take them a lifetime to work through negotiations with all of those issuers," Dua says. An Isis representative did not provide comment by deadline.
Isis has already signed major issuers such as JPMorgan Chase, Capital One and American Express.
Google hopes to eventually include loyalty cards, gift cards, transportation passes, boarding passes, and other forms of identification in the Google Wallet for use with the mobile phone or in making online purchases, Dua says.
"We are still in the early stages of mobile wallet development and the technology is likely to evolve a few more times," Luria says. "Google changed its approach and Isis is likely to be flexible as well."
The technology seems to be changing so quickly at this time simply because no one has figured out the best approach as of yet, Luria says.
"It's a little bit like the Wild West out there right now," Luria adds.
Google is also working to further simplify the process of joining its mobile wallet for merchants and issuers, Dua says.
Google has launched various application interfaces for its partners, including a "Saved to the Wallet" button for merchants and issuers to use on their websites. Consumers can use the button on issuer sites to download a payment card into their Google Wallet, and on merchant sites to download coupons or loyalty program information, Dua says.
As for merchant and consumer adoption, Dua says Google strongly believes that Near Field Communication chips will be a standard feature on all smartphones in a short period of time, thus promoting more use of mobile wallets.
"Samsung sold 10 million Galaxy III devices in the first two months it was available, and that phone has an NFC component," Dua says.
The Google Wallet, which works at point-of-sale terminals that accept MasterCard PayPass contactless payments, remains available only on Sprint and Virgin mobile phones. But Google continues to negotiate with more carriers and should have announcements about additions in the coming months, Dua adds.