Despite a series of challenges and missteps from Google Wallet's earliest days, the app has tightened its grip on the Android ecosystem and squeezed out the competition and Google must now decide whether Apple Pay is its next target or its most unlikely ally.
Google's footing has never been more secure. After years of sparring with the U.S. carriers' Softcard wallet, Google has emerged victorious over its rival and taken over Softcard's most valuable assets. With alternatives like Samsung Pay and CurrentC yet to arrive, Google has a clear road ahead of it.
At this point, the fight has escalated: it's no longer about which wallet app will win, but which mobile platform. Apple remains a formidable contender, but Google has proven capable of edging out the iPhone maker despite launching the Android platform a year after iOS debuted.
"Google Wallet challenges? I'm not sure they have one," said Thad Peterson, a senior analyst for payments at Aite Group. "I don't think they have a significant competitor in Android [and] in mobile payments, it's the operating system that wins."
According to data from eMarketer, Android has 51.7% of the U.S. smartphone platform market in 2015 after years of steady growth, ahead of Apple's iOS 43.3%. Android is even more dominant outside the U.S.
There is also very little shifting between mobile device platforms, meaning that an iOS user is as unlikely to jump to Android as an Android user is to jump to iOS. Almost all Android and iOS growth appear to be coming from rapidly dwindling fortunes from Windows Phone (falling to 2.8% this year from 3.3% in 2013), Blackberry (which plummeted to 1.1% this year from 3.0% in 2013) and other devices, according to eMarketer.
As for Samsung, its fight with Google has already played out in the smartwatch arena, where Samsung's platform had the early lead only to see the market flooded by Google's Android Wear the following year (with Samsung hedging its bets by launching its own Android Wear device).
Right now, the best source of momentum for Google Wallet is, ironically, its remaining rival: Apple. As Apple leverages its sizable marketing budget to convince merchants and consumers to adopt mobile payments, Android users will hear the same message and gravitate to Google Wallet.
Bryan Yeager, a payments analyst at eMarketer, sees Google's recent acquisition of Softcard's technology and its agreement with the carriers to have Google Wallet pre-installed on their phones as the coup de grâce for Samsung Pay. "The Softcard deal opens up this opportunity," he said. "Google Wallet is much better positioned than they were."
Yeager also applauded Google's announcement this week that it will move its consumer funds on deposit into bank accounts that are FDIC insured.
"This will add that layer of consumer trust," he said, which will be crucial if Google starts offering other financial services. "It's a proactive move. If they want to ingratiate themselves with the financial community and show that they have some credentials there," the FDIC move should prove helpful.
"It says that they are willing to work with regulators and banks," Yeager said.
Google's biggest setback was launching before the market was ready, said Nick Holland, head of payments analysis at Javelin Strategy. But today, he sees little that could derail Google Wallet. Apple Pay's efforts provide "a marginal incremental lift on what activity [Google Wallet] already has. It's would be hard for them to not get some kind of traction piggybacking on the halo effect of Apple Pay."
But even if Google has an advantage, nothing is ever certain in technology. Just as BlackBerry lost its dominant grip on the smartphone market, Google Wallet and Android could fall victim to a new entrant that draws attention away from Android or from smartphones altogether. With many well-funded startups entering the market and social media platforms integrating payments, anything can happen.
"It certainly looks like rosy days for Android and all kinds of mobile payments, but you don't know what is around the corner," Holland said.