Google Wallet dropped NFC Loyalty Points and Gift Cards
Google recently announced fundamental changes to its Google Wallet service. On August 21, Google Wallet stopped supporting NFC redemption for gift cards and merchant loyalty points. In these competitive times, more and more businesses have come to rely on loyalty programs to spur consumer activity. By simplifying the point-of-sale experience, NFC payments are supposed to optimize loyalty programs for mobile shoppers. The new changes to Google Wallet may make some companies rethink joining Google’s bold experiment in merchant services.
Though Google says it is looking for new ways to process loyalty and gift cards, no details are available as of yet. Nor has Google revealed a specific reason for scaling back its mobile wallet service. Furthermore, this newest change caps a string of high-profile personnel shuffles and policy changes for Google Wallet. In the wake of embarrassing security issues, Google discontinued its virtual prepaid debit cards last year. Since prepaid cards are gaining popularity very quickly, Google’s move inspired curiosity and controversy alike. In May, many observers were startled by the sudden departure of Osama Bedier, the vice president and public face of Google Wallet.
The story of Google Wallet demonstrates the complex pitfalls of pushing technological innovation in merchant services. For years, Google has boosted NFC technology as a game-changer for the mobile wallet industry. Though the company remains officially committed to NFC-enabled point-of-sale transactions, the changing dynamics of Google Wallet could herald future troubles for the payment system. In 2013, the public is increasingly worried about privacy and security issues. As details emerge about corporate involvement in NSA snooping and surveillance, many are wondering if Google is fully committed to safeguarding customer data. For many, these concerns may overshadow and obscure the security advantages of Google’s NFC-powered transactions.
Deeply invested in NFC technology, Google’s course is innovative yet arguably too experimental for many companies. Even forward-thinking carriers and vendors have limits to their adaptability. If Google Wallet’s limited market share is any indication, many smaller merchants are still unsure about the practicality of adopting NFC payments.
When I first started writing for this website, and The Official Merchant Services Blog, a topic I was both fascinated with and completely astounded by was Near Field Communication (NFC). It seems fitting that on the eve of the National Football League’s 2012-2013 season debut — a rare Wedensday Night Football game — which features a gridiron battle between the Dallas Cowboys and New York Giants, two mainstays of the National Football Conference (NFC), that I would once again be tackling the topic of NFC. The first time I saw the acronym I thought it was talking about football.
It wasn’t.
It was talking about technology that was poised to revolutionize payment processing and make everyone’s phone their wallet. We were going to be radically transformed from a cashless society relying on plastic cards with magnetic stripes into a cashless society relying on waving around your smartphone at registers and terminals who pick up your signal and magically charge your account. One swipe of the phone, and no hassle whatsoever, as Near Field Communication did all of the talking back and forth between devices while you figured out what you were going to buy next.
But over the past couple of years, the dominance of NFC has pretty much mirrored the Dallas Cowboys own dominance of the NFC in which they play. A lot of hype, but not a lot of tangible financial results. The biggest proponent of NFC has been Google Wallet, but another giant of the NFC industry-in-waiting has been Isis. Just like the NFL season, Isis — the mobile-payment joint venture backed by AT&T Inc., Verizon Wireless and T-Mobile USA Inc. — is poised to get underway in September too.
VeriFone Systems Inc., a maker of payment terminals that Host Merchant Services offers for free to qualifying merchants that sign up with them, is working on the Isis project. Chief Executive Officer Doug Bergeron said in an interview with Bloomberg that VeriFone is preparing to introduce Isis in Salt Lake City and Austin, Texas.
Isis had initially planned to roll out its NFC-based mobile payment service in the first half of 2012. The joint venture tweaked its strategy last year, opting to use credit-card companies to handle transactions rather than the carriers themselves. This shift has taken time to implement because its been focused on ensuring payments can be made securely — the single biggest fear that consumers have voiced about mobile payments.
Are You Ready for some Mobile?
So now that Isis is on the cusp of kicking off NFC-fueled mobile payments in select areas, is this validation for the technology? It doesn’t seem that way. Google Wallet’s NFC-integration still hasn’t come to my local shopping areas. But many other mobile payment options have. I can and have bought movie tickets on my phone. This was done using the QR-Code technology which seems to have had a quicker integration into the U.S. Economy at large. It was something that many companies were already using for their marketing so utilizing the technology to work for payments was faster as it relied on infrastructure already in place, and consumer fears of security were lower since consumers had already opted in with the codes.
Toss Square’s partnership with Starbucks and PayPal’s partnership with Discover into the mix and it seems like the Mobile Payments industry has decided it wants to score an industry-wide touchdown with or without the help of NFC. In fact, Devindra Hardaware suggests in a column for VentureBeat that the industry could still make use of the ideas in NFC, but completely bypass the ground game entirely by going with an aerial assault guaranteed to score big with consumers: “There’s still plenty of room for mobile wallets to disrupt the way we pay — just look at the Pay with Square with app, which lets merchants charge you just based on your name and face. In many cases, you won’t even need to pull your phone out of your pocket.”
Magic 8-Ball on Mobile Payments: Outlook Hazy, Ask Again Later
Mobile Payments are getting a lot of press right now and are being heralded as the future of commerce. There are quite a few media sources playing the role of prognosticator, tagging Mobile Payments as a billion-dollar boom waiting to explode. But as we creep right up on the 2011 holiday shopping season, the actual impact of Mobile Payments is still short of its predicted potential. So today The Official Merchant Services Blog is going to take a brief look at Mobile Payments, shaking the topic up vigorously and seeing what the Magic 8-Ball (a potential holiday gift in itself) has to say about the whole thing.
Sunshine and Positivity
One of the most commonly quoted statistics about Mobile Payments can already be found in Host Merchant Services Article Archive in a story about Mobile Payments and how bright the future is: A Juniper Research study that predicts the value of all mobile money transactions will grow from $240 billion to $670 billion. That’s a hefty number and makes for sexy copy. Other stats cited often from the Juniper Research study are that digital goods will make up nearly 40% of the market that the $670 billion figure is drawn from. And that Asia, Western Europe and North America will make up nearly 75% of the entire market for those goods.
So that’s the good news. What’s the bad news?
Two Big Problems
The bad news is mobile payments haven’t taken off as quickly in the U.S. as the media reports suggest. The Juniper study sets things in four years in the future. So the boom is still very much capable of happening. But two things are holding Mobile Payments back in this country:
The technology isn’t developed fully yet.
Security issues scare consumers.
The technology is sort of all over the place right now. You have a variety of different ways to process a mobile payment. And the biggest competitors in the industry (Google, PayPal, Amazon.com, MasterCard, Amex, Visa) are all still racing to outdevelop each other. Google Wallet is still not fully there yet. Near Field Communication (NFC) is still only being tested on a small scale in the United States. The phenomenon simply hasn’t taken root.
Security Concerns
The other major problem holding a Mobile Payment boom back in the U.S. is security. People are already worried about credit card hacks, phishing scams and the security of their transactions with plastic or with online transactions. PCI Compliance is a hot button issue, especially in light of Sony’s security breach earlier this year as well as the recent DigiNotar Hack. So technology like NFC where people just wave their cell phone at a scanner make people nervous about how secure the transaction really is. And of course it was already shown this year at a security conference that the Square device from Square Up could be hacked and used to steal credit card information.
All is Not Doom and Gloom
While there isn’t much anyone can do but wait when it comes to the technology being developed, Host Merchant Services provides a nice set of tips for addressing the security concerns.
And the Mobey Forum provides a whitepaper extensively reviewing the ability for NFC mobile payments to take hold, and detailing ways to make that happen.
Blogger Keith Cowing also wrote this interesting read on mobile payments, addressing the issue of security and the worries consumers have over eReceipts. In his blog he asks: “The world of retail is changing faster than it ever has before. Nobody had heard of flash sales, group buying, or NFC three years ago. One of the most exciting changes will be the adoption of mobile payments and eReceipts, which will combine to provide a paperless way to checkout and manage your expenses. But when mobile payments and eReceipts become widespread, who will own your purchase data and how will they use it?”
A very compelling question. He goes on to touch on many of the same talking points The Official Merchant Services Blog brings up about mobile payments. I’ll leave you with Mr. Cowing’s final point: “When a customer visits your website, walks into your store, makes a purchase, gets an eReceipt, or talks about your brand on Facebook, these are all touch points in an ongoing customer experience. Your brand is represented by every step along the way and doing the right thing for your customer is doing the right thing for your business. When it comes to mobile payments and eReceipts, providing a convenient and simple solution is part of the customer experience. “
That’s exactly what it’s going to take for Mobile Payments to reach those lofty Juniper Research predictions. The customer has to experience mobile payment as a convenient and simple solution to their transactions. That’s when the mass of consumers will just seamlessly shift their gears (and their dollars) into mobile payments.
