Google Expands Options, But US Carriers Will Prefer Own Wallet Services
In light of our Hotline looking at the mobile payment strategies of Apple, Google and Microsoft, the recent announcement by Google of a virtual MasterCard account sees Google Wallet making its first steps toward deploying a cloud-based payment solution. Google Wallet customers can now integrate different credit cards through the cloud with the virtual MasterCard account that sits on the secure element of the device.
This should reassure customers that their personal credit card information is no longer at risk from being accessed from the Android handset. (Google had previously suffered some embarrassment when customers reported that payment credentials from Google Wallet could still be accessed after the handset had been reset). However, it is difficult to see whether this solves Google Wallet's security problems or simply shifts them to the cloud, which is just as vulnerable from hacking, as any number of examples show.
Nevertheless, Google needed a change of direction. Google Wallet has been struggling to expand its deployment beyond Sprint and Virgin Mobile in the US, largely as a result of the company's desire to own customers by controlling access to the secure element. Now that this new approach sees card information being shifted to the cloud, it could be the first step toward Google simply making the wallet available through the Play Store. Indeed, Google has already stated that this new version will include some cloud-based capabilities such as remotely disabling the wallet if customers lose their phone.
However I'm unsure whether this means Google will be able to bypass carriers completely. Controlling access is still likely to be a source of contention for mobile network operators because Google will have to convince them to allow the virtual MasterCard number to be stored in a secure element on the phone.
The irony is that we are essentially returning to the same argument that phone-makers and operators were having last year and the year before about who gets to own the customer. This continual argument has effectively delayed products reaching the market, even though NFC technology has been available for many years. The only difference now is that the handset manufacturers that were willing to support operators by using Single Wire Protocol no longer dominate the market. Platforms like Android and iOS have gained the upper hand, and these are more likely to develop and deploy their own mobile payment services.
In the US, where carriers boast a great deal of control, it's difficult to see how Google Wallet could expand onto other networks. The operator-backed Isis initiative will be ready to launch its mobile wallet soon and its supporters are unlikely to offer a rival product. But I wouldn't rule out that smaller operators in Europe sign up to Google Wallet. Eight months ago, we predicted that 3 would be the first in the UK, and I'm still certain we'll see similar agreements before the end of the year.