Google Wallet Starts Carrying More Plastic

The mobile payment system Google Wallet now works with all major credit cards and will begin transitioning to a cloud-based model.

The service allows users to tap their smartphones to pay at a retail checkout location, rather than having to swipe a credit card or shell out cash. It uses near-field communication (NFC) technology that allows a user’s credit or debit card information to communicate wirelessly across a payment register at select retailers. The technology is widely used in some parts of Asia, but it hasn’t gained mainstream momentum in the U.S.

Google aims to change that by allowing all major credit cards, the company announced Wednesday. Previously, only Citibank accounts, MasterCards and certain Sprint phones could be used with Google Wallet. To encourage usage, Google Wallet will now store user credit card information via the cloud.

Before, Google stored credit card information securely on the phone, which required the permission of wireless providers, banks and credit card companies. The change ensures that Google will have to navigate through fewer negotiations with the country’s many banks. It is also more secure, since customers can disable Wallet through the cloud if the phone is stolen.

Google did not respond to our request for further details.

Still Needs Time

Google is not the only company breaking into the mobile payment system in the U.S. Competitors come from different sectors. Payment networks such as Visa and MasterCard have experimented with mobile payment, as have wireless carriers including Verizon, AT&T and T-Mobile. Companies such as eBay’s PayPal are also launching systems for digital wallets.

The major hitches that those companies face are negotiations with banks and wireless providers, so Google’s inclusion of all major credit cards and its launch of the cloud system is a smart step, said David W. Schropfer, head of mobile commerce at the Luciano Group.

“Google is making a smart move with the upcoming new release of Google Wallet, and the change is less complicated than it seems,” he told the E-Commerce Times. “Google is simply leveraging its Google Checkout platform by extending it to mobile phones to give its mobile users the option of storing any payment card in the cloud.”

But the system isn’t foolproof. Users still need to have certain Sprint or Virgin Mobile phones, or the company’s Nexus 7 tablet. And even if there are more compatible devices available soon, driving mass adoption will take more time, said Sandy Shen, research director for consumer services at Gartner.

“It is surely a nice thing to have all credit cards available, but it is not enough to help it go to mass market adoption,” she told the E-Commerce Times. “Many challenges still exist.”

Slowly but Surely

One of those challenges is incentive for customers, said David Chamberlain, principal analyst at Alloy Research. For U.S. consumers to adopt the technology, simple convenience in payment is not going to be enough.

“The true driver is going to be when Google Wallet or other mobile payment systems can add something more than just payment,” he told the E-Commerce Times. “When people see NFC apps that could be personal as well as payment, such as playing games, swapping business cards, signing on to WiFi networks or other types of communication such as BlueTooth, they can really get excited about the system.”

Customers could also be driven by special deals from using NFC technology, said Shen. Now, Google has a program called “Google Offers” that lets shoppers at certain retail outlets that use NFC technology earn discounts with each use.

“On the behavior side, you need to give value to persuade people to start using Google Wallet to pay instead of using cash or cards,” she said. “Google Offers is a plus but may not be enough to change the user behavior. The rewards should be compelling enough.”

Since incentives need to come from so many different sectors — banks, wireless providers, smartphone manufacturers, retailers — the adoption isn’t going to happen for a while, said Chamberlain.

“It’s going to be really slow,” he said. “But the people with their hands on the throttle are handset vendors, so that if it’s there people start using it. And app developers, those are the ones that really have the power to create demand. Between them, it could really get going.”