A fresh update to Google's mobile wallet allows users to make payments from any credit or debit card, a move that fundamentally changes the company's approach to working with issuing banks.
Until today, Google required banks to partner with it before presenting their cards as an option to consumers within its mobile wallet. At Google Wallet's launch last year, only Citigroup had entered into this type of arrangement, and today Citi remains the only bank partner Google has announced.
The new setup allows consumers to link any Visa, MasterCard, American Express or Discover card to a virtual MasterCard account issued by The Bancorp Bank. To an end user, it would appear that the cards are directly available on the phone, without having to pass through a separate account.
"What we are doing, as a part of [this announcement, is] making it easier for issuers to push their cards into the wallet," says Robin Dua, head of product management for Google Wallet. "We have simplified the integration experience."
Google invites banks to upload card art and ease integration by filling out an online form. Google does not charge banks for this service. Google is also launching a set of "lightweight" application programming interfaces for banks.
Under this new model, "linked" cards take a cloud-based approach to security. Google stores each card's details on a server it controls. This boosts security by allowing users to manage their payment details without needing to be in possession of the Wallet-enabled phone.
"We have enabled a feature that is called the Cloud-based Kill Switch," says Dua. If users lose "their phone they can disable the wallet. What this feature does is it actually wipes all the information that is in the phone."
With the cloud-based wallet, Google acts as the merchant of record. It presents only the virtual card number to brick-and-mortar retailers. However, Dua says, issuers still receive the transaction data from Google Wallet purchases.
With the directly enabled Citi card or Google's prepaid card, Google still presents the actual account number to merchants.
The new feature builds on Google's recent acquisition of the prepaid card processor TxVia.
"They are at the heart of this new version of the wallet that we announced, and we are using some of their platform technology to support the 'all cards in the wallet' feature," says Dua.
Citi says it expected Google to invite more banks to participate.
"It was always the goal for this to be a wallet that is open to all banks," Nina Das, a spokeswoman for Citi, said in an email.
"Citi is committed to being a leader in digital banking and we are very pleased to have partnered with Google as the first card in the wallet," she wrote.
Google's change to its mobile wallet model may have been inevitable, says Aaron McPherson, a research manager for payments at IDC Financial Insights in Framingham, Mass.
"I figured that they would probably go to a cloud model pretty soon," he says. "They really hadn't moved forward very far since their announcement last" year.
Now, McPherson says, Google doesn't need to partner with banks to enable its digital wallet.
"One of the big things that they were talking about in the blog was the difficulty of provisioning a card in the old model," he says. "Essentially they are doing exactly what PayPal is doing with their digital wallet. It's almost exactly the same, but it still has this connection to" a near-field communication chip for contactless payments.
It might make even more sense to abandon NFC altogether, he says. Google Wallet works with just the six Android-based phones and one tablet available in the U.S. with NFC chips, but any smartphone or tablet could display a bar code at the point of sale, he says.
With the addition of this third method to fund Google Wallet purchases, "hopefully, three's a charm for Google," says Brian Riley, senior research director with CEB TowerGroup.
The Google-branded prepaid card, which remains an option for Google Wallet users, had some widely publicized security issues that could have allowed a thief to bypass the user's PIN to access funds in the stored-value account.
"This time hopefully they lock up the security and the partnerships properly," Riley says.