Google was first to market with its’ release of Google Wallet on September 19th, an exciting innovation in the mobile payment space. Consumers with Google Nexus S phones on the Sprint network can load their MasterCard onto their device (and other cards in the near future), and pay for goods and services by tapping the device against an NFC terminal. The user interface is simplistic and clean, with the added benefit of carrying in-app loyalty cards. Google Shopper is a nice in-app feature as well, which helps users find local deals. You don’t have to open the app to use Google Wallet. Simply place your phone near the terminal, enter your password, authorize the amount and pay.
Being a first-mover is not always a golden ticket. Remember MySpace, Atari, Apple’s Newton PDA, Charles Stack Online Bookstore? How about Facebook, Nintendo, Palm Pilot, and Amazon? What do you use Yahoo for besides fantasy football and spam email? First-mover advantage generally occurs when there is a scarcity of resources, thus delaying or restricting competitors from entering the market. As NFC technology has been around since 2002 and an estimated 50 million NFC-enabled devices will enter the market in the next few years, scarcity of resources is not an issue. So what are the issues surrounding Google Wallet becoming ubiquitous?
Credit Card Companies are Self-Motivated
Credit card companies will license their NFC payment terminals to all the major competitors. Visa just licensed PayWave to Google, because they want to give cardholders every possible outlet to use their card. Credit card companies are less concerned with what NFC wallet is better, and why would they be? They make money off the transactions regardless of the carrier or device. While this will lead to a more fractured device marketplace, it will ultimately lead to better products and a strong investment in NFC terminals worldwide.
Brand Image is Paramount
“When companies are willing to challenge the functional-emotional orientation of their industry, they often find new market space…Swatch transformed the functionally driven budget watch industry into an emotionally driven fashion statement.”
Kim & Mauborgne, Blue Ocean Strategy
A sustainable brand strategy will create significant barriers to imitation through operational advantages or unique emotional connections with users. At the end of the day, consumers are generally uninformed about NFC technology and credit card fraud is inevitable. Therefore, Google will have to instill feelings of trust to meaningfully connect with consumers.
How can Google Wallet appeal to customers’ trust when the competition will likely include companies where users have already trusted their financial information with the brand (i.e. Apple’s iTunes, PayPal)? A survey by Ogilvy & Mather concluded that more consumers trusted PayPal with mobile payments than Google (34.3% vs. 19.5%). One strategy is for Google to procure partnership/co-branding agreements with as many banks as possible. Think about the loyalty most people have to their bank. By branding Google Wallet as a value-add for personal banking, Google will appeal to the trust of consumers and gain added visibility.
Assume Apple Will Be a Player From Day One and Differentiate
With the ability to leverage existing iTunes users who have already trusted Apple with their credit card information, Apple is in an obvious position to compete in the mobile payment space. It’d be surprising if Apple doesn’t come out with an iWallet in the near future. With several strong competitors in the market, how can Google Wallet’s value proposition differentiate itself?
Between Google Maps, Google Offers, Google +, and all of Google’s other services, Google Wallet is an excellent position to exploit existing products to add value to Google Wallet. Every YouTube user is a potential user of another Google service. Leveraging existing products through integration and cross-promotion could help Google Wallet pull ahead as a market leader. Product integration will yield a tremendous amount of consumer data that Google can exploit, but they will have to be very careful to use this data in a way that does not compromise user security. When consumer trust is gone, Google Wallet will quickly falter.
Google has partnered with Subway, Walgreens, CVS, and many other merchants. Subway has approximately 24,000 locations in the US, more than any other American merchant. While other mobile payment solutions will partner with the same merchants, times are tough and everyone loves a deal. Therefore a key to Google Wallet’s success will be adding value to mobile payments that far exceeds convenience. In my opinion, that value will come from integrating Google’s current services and providing BETTER AND MORE CONVENIENT DEALS. Google Wallet currently gives users a $10 credit, which I think is a good start. However, the frequency, quality, and relevance of Google Wallet deals will be a key differentiating factor in its’ success.
Lets face it – Credit cards, the current mobile payment solution, are pretty simple. A mobile payment system will not be disruptive technology simply because it helps George Castanza thin out his wallet. In-app loyalty cards are convenient, but we still have to carry our driver’s license and cash for non-participating merchants. In order to gain market share, Google Wallet will have to be carefully branded as a secure application with significant monetary benefits. As we haven’t seen much advertising for Google Wallet yet, it will be interesting to see what direction they take.