February 24, 2015
Google is revamping its payments strategy in preparation for positioning its refurbished Google Wallet head-to-head against competitors like Apple Pay. As reported by Wall Street Journal, Google is planning to bring mobile carriers into the picture. For mobile payment systems like Apple Pay, mobile carriers don’t have much incentive to feature it in the iPhones they sell. But Google is planning something different that could see mobile carriers receiving monetary gains for featuring Google Wallet in the phones they sell.
As reported by WSJ, Google will actually pay mobile carriers in the U.S. to preload Google Wallet on the devices they sell. It has been reported earlier that Google intends to buy Softcard, the mobile payments system developed by Verizon, AT&T and T-Mobile. But there is no official confirmation on this yet, and as far as we know, Google is still in the negotiation phase. In purchasing Softcard, Google could provide a continued externally funded incentive to the three mobile carriers for this collaboration.
Considering the mobile payments scenario in the U.S., Apple Pay has been quite the rage. Google Wallet has been in the market for a much longer time compared to Apple Pay, but its uptake has been far below what Apple Pay achieved. The refurbished Google Wallet will certainly aim to be as widespread as Apple Pay. It is expected that Google will make an official announcement about the refreshed Google Wallet at the upcoming Google I/O developer conference this year.
Google is also in talks with payment networks and banks to create a partnership similar to the one offered by Apple, in which processors and banks pay a small fee to the wallet provider, whose security measures reduce their fraud-prevention costs. However, Google’s Host Card Emulation (HCE) security protocol may require banks to upgrade their security, possibly resulting in higher costs when partnering with Google Wallet.
There have been rumors that Google is also in talks with Visa and MasterCard for possible partnerships. Besides mobile carriers, It is expected that Google will partner with banks and retailers, similar to what was done by Apple Pay, using tactics such as increased share of profits. The new Google Wallet may even be more than just a tap-and-pay app. We should expect an entirely new payments platform based around Google Wallet. We are already seeing some evidence of transformation in the current Google Wallet implementation. Recently, Google launched P2P money transfer for Gmail users in UK which is powered by Google Wallet.