Google today launched its mobile-payment platform Wallet with what will likely prove to be the killer app in persuading consumers to trade in their credit cards to pay by smartphone: the financial and retail partners that billions of consumers already know.
Google has partnered with MasterCard and Citi in its Wallet application, which is designed to be a combination credit card, rewards program and coupon case when customers tap their smartphones at the register. Also on hand were Google's posse of retail and restaurant partners, including Subway, American Eagle and Macy's , which will enable Wallet payments and offers when the platform launches this summer. For now, consumers will need an Android-powered smartphone with a near-field communications (NFC) chip, like that found in Google's own handset, Nexus S.
Google does not plan to skim transaction fees on purchases through Wallet, which would encroach on the revenue credit-card companies and banks rely on. Google is just building the ecosystem to make money from advertising, as it always has, said Stephanie Tilenius, VP-commerce and payments for Google.
"We're not making money in commerce, we're making money from our core business, which is advertising," she said. The company plans to charge costs per action on offers in wallet.
Here's how Wallet works: To set up, consumers can either enter their Citi MasterCard information into the app or load a pre-paid Google card with any payment account. Then they can load the app with coupons or loyalty programs and, when they're shopping, simply tap on MasterCard PayPass terminals to process a transaction with any discounts or rewards points going into effect immediately.
Google, of course, is not the only party angling to be the platform of choice when consumers begin to make purchases en masse using their phones; Twitter co-founder Jack Dorsey's latest startup, Square, and even mobile carriers AT&T, T-Mobile and Verizon have similar aspirations.
So what does Google have that the others don't? First of all, consumers will be able to pay with Wallet at MasterCard's more than 124,000 PayPass-enabled U.S. merchants (311,000 globally). To compare, Mr. Dorsey's Square launched with 50 local merchants on board. That reach is tempered by the comparatively small number of smartphones with NFC chips in market today. There will be 50 million NFC phones by the end of the year, said Ms. Tilenius, but scale "is coming, everyone is jumping on the bandwagon."
Wallet is also counting on Citi's wide customer base, as well as major retailers and restaurants, to help get the word out about how mobile payments actually work. One partner on hand, Subway, is the largest restaurant chain in the world. All those parties will have a hand in marketing Wallet once the new system's kinks are worked out, Ms. Tilenius said.
Wallet also shows how Google's many ad products across the web and its mobile software Android could finally work together. Google additionally launched Google Offers today, its very own Groupon competitor. With Wallet, consumers will be able to save deals from Offers, as well as coupons in search or tap-to-download coupons from outdoor posters, to their wallet apps.
Osama Bedier, Google's VP-payments, demonstrated how buying a pair of shorts at American Eagle would work with Wallet. Through Google search, he found a coupon online for 20% off anything at AE and saved the offer to his Wallet app. (The Offers ad product will be out in wide release when Wallet launches this summer.) Then, at the store, he tapped his smartphone on the MasterCard PayPass terminal and the transaction, minus the discount plus AE rewards points, processed together.
This Wallet-plus -Offers combination has likely left Groupon sweating for the first time. While Google has been criticized for being late to the daily-deals game, especially after Groupon shunned its $6 billion acquisition bid last year, Google looks to be leapfrogging Groupon in bringing deals to mobile. If it works, Google's product will distribute the type of deals Groupon made possible via email to the Wallet app, as well as other Google apps -- such as Shopper -- and in online search.
To make headway in mobile, Groupon has been offering incentives to its email subscriber base -- which numbers 60 million users -- to download its own mobile app with free credits. Groupon has also inked a distribution deal with Loopt, an early Foursquare competitor, to pipe Groupon deals to that app's millions of users. Groupon has also been testing a new mobile product, Groupon Now, in its home market, Chicago, where users can get instant deals, such as for a sandwich at noon on a weekday.
That ability to find consumers on their smartphones is exactly what Jeff Larson, Subway's VP-global marketing development and activation, sees as the promise of Google Wallet. "Think about the purchase decision with quick-serve restaurants," he said. "It happens right before you go out for lunch." Sending out a coupon on Wallet is just the tip of the iceberg, he said.
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