Google mobile payment service

Today there was an interesting article in BusinessWeek that confirmed what we were expecting since Eric Schmidt announced support of NFC in the latest revision of Android OS late last year.

The article talks about how

A single NFC chip on a mobile phone would hold a consumer’s financial account information, gift cards, store loyalty cards, and coupon subscriptions, say the people familiar with Google’s plans. Users may also be able to make online purchases from their phones. By scanning a movie poster, for instance, a consumer might read reviews and use the Google service to purchase tickets.

(For those who don’t know, NFC is the Near Field Communication technology which enables communication in close quarters between a cell phone and another device (active) or an RFID (passive) tag).

On the front end this means that Google will be developing a wallet application. This application will do something like the following:

  • Store customer information like Credit Cards, Paypal, Google Checkout, Facebook Credits, SocialGold stuff etc.
  • Provide an interface for users to use a payment source to pay a bill. The amount of the bill might be automatically send from the receiver or might be entered by the user. The user will have a chance to add a tip
  • The user will then tap the device
  • Tie all this payment information with coupons and ads shown to a user on their phones etc. This will enable end-to-end tracking of ad ROI for users.
  • Enable loyalty programs etc although tying loyalty program to a fragmented payment market might be ineffective

(How will this flow work when users are dining at a nice restaurant and the payment does not happen at a checkout counter?)

At the storefront, Google will need to provide an internet connected device (see my previous article Google to hand out devices to local businesses . They will likely work with the existing processors in the beginning). This device will likely do the following:

  • Handle Credit card transactions (This will likely disrupt the processors – they are going to fight this tooth and nail – interesting to see how this shapes up)
  • Manage the communication with the phone based wallet app

(How will this interact with the POS systems, and who will retail what data? I think Google will eventually release a simple POS system as well with this)

If Google gets really ambitious and wants to get a bigger piece of the pie, they will need to take on the existing payment providers like Visa etc.:

  • Become a massive credit card processor (This massive aggregation is going to challenge the payment networks like Visa, MC etc. and they will likely work against Google)
  • Develop a currency like Facebook credits (Jambool acquisition?) to benefit from control of the end-to-end payment process
  • Provide reporting, customer support, account management for all the local businesses.

This is going to be quite an undertaking for Google. This development does open a lot of interesting strategic questions for companies like Facebook, Paypal etc. But that is subject for another post.


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