Will U.S. contactless card surge hurt Google's mobile wallet?
Google has made significant headway against merchant reluctance and branding confusion on its path to offer mobile payments. But an influx of contactless cards in the U.S. threatens another setback to mobile wallet adoption.
“We just had a large holdout merchant flip in the right direction and we immediately saw an uptick in mobile payments transaction volume, which was very exciting,” said Spencer Spinnell, Google’s director of emerging platforms, alluding to Target’s move early this year to accept Near Field Communication-based payment in stores.
But it's a victory that may be short-lived. With major U.S. banks moving to contactless card technology, it could give consumers one more reason to avoid using their mobile devices to pay in stores, Spinnell suggested during a Q&A at the recent Electronic Transactions Association’s annual gathering in Las Vegas.
Major issuers including JPMorgan Chase & Co. and Wells Fargo & Co. are rolling out contactless cards this summer to speed up the sluggish chip-card store checkout experience.
“I don’t think contactless cards are going to help. I think they’ll help the payments industry, but they won’t help third-party mobile wallets per se,” Spinnell said.
Mobile payment technology creates a richer experience for shopping and loyalty, he said.
“Look at what we’re seeing in quick-serve restaurants [with mobile payments], what we’re able to add to users’ day in areas like conversational commerce, how we're adding value to payments and shopping,” Spinnell said, noting the richer transaction and shopping options mobile payment technology supports, along with new instant-enrollment in retailers’ loyalty programs. “There's an opportunity here for the networks and issuers to get behind this and push mobile as a payments form factor.”
Google has already endured challenges with mobile payments. It launched Google Wallet in 2011 when merchants weren’t ready and major mobile network operators blocked its acceptance. Google tried again in 2015, touting Android Pay as a convenient method for paying in physical stores and online. But the NFC-based payment method may have been pitched too narrowly.
“We didn’t do a good job—in my opinion—of connecting the dots for users,” Spinnell said.
Last year Google rebranded the concept, unifying Android Pay and the remaining Google Wallet features under the Google Pay brand, conveying its usefulness across all Google platforms.
“We made a conscious decision to not only bring this together in a way users would understand, but to get all of Google on board with the fact that Google Pay underpins all of the company’s first-party transactions too—on YouTube, Drive and other services where Google is the merchant. Google Pay connects the user’s financial relationship with Google,” Spinnell said.
Conversational commerce also holds a lot of potential to expand use of Google Pay, according to Spinnell.
“The number of Google queries that are voice-based versus text is absolutely skyrocketing, and what you’re going to start seeing is a significant wave of integrations and innovation that will revolutionize how consumers pay,” he said.
Merchants who initially seemed wary of Google's foray into payments are much more interested in collaborating these days.
“When we started with mobile payments, we were seen as a little bit of a competitive threat and maybe our intentions weren’t as clear. Now we’re seeing a willingness [from merchants] to partner that I haven’t seen before,” Spinnell said.
Mobile payments are more popular outside the U.S. and Google Pay is advancing globally; this month Switzerland became its 30th market. Asia looks extremely promising for Google Pay, according to Spinnell.
“It’s fascinating to see the uptick and the engagement in China, where merchants—largely unorganized retail—accept payments directly on the mobile device via Alipay or WeChat,” he said.
Those two mobile wallets are ubiquitous in China, but usage is bumpy and security is questionable, leaving much room for improvement, Spinnell suggested.
“In the context of Alipay and WeChat, the traditional financial ecosystem of networks and issuing banks have basically been disintermediated; they no longer have a role because all the value sits in these stored wallets. And the user experience for those wallets isn’t beautiful; they’re hard to use," he said.
In India, Google opted for a radically different mobile wallet approach, Spinnell said.
Google began working with India’s state bank a few years ago, taking an active role in supporting the unified payments interface (UPI) mobile payments approach, which is backed by the Reserve Bank of India with participation of many large banks, he said.
“UPI was effectively a peer-to-peer platform and it wasn’t getting much usage, it was falling flat. We sat down with regulators and banks and lobbied aggressively to build a [payments technology] layer on top of UPI,” he said.
Last year Google rebranded its Tez mobile payments app in India as Google Pay and worked to help the number of merchants accepting it. The user base is now up to 40 million in India, according to Spinnell.
Transit operators’ mobile payments support in major cities like London and New York will likely accelerate Google Pay’s usage, Spinnell said.
“Wherever you have these really prolific use cases, you see amazing traction. It’s all about removing friction, increasing transaction velocity, making it easier for consumers to buy things,” he said.