Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Recently, Google Inc. announced Google Wallet, a virtual wallet and set of services to allow smartphones with an embedded near field communications chip that will enable consumers to purchase products via tap and pay at thousands of retail merchants. The announcement identified many financial partners, including MasterCard, CitiCorp and FirstData. Google expects the service to go live later this summer.
Cellular carriers, banks, credit card issuers, payment networks and technology companies have to work in conjunction with each other, not just those in the Google alliance announcement. Thus, the virtual wallet and NFC systems must operate with Visa, MasterCard, American Express, CitiCorp and back-end payment processors such as FirstData and Fiserv.
While I commend Google for this announcement, it’s clear that we will need to create an environment in mobile retail commerce in which shoppers with any smartphone (Apple Inc.’s iOS, Google Android, Microsoft Corp.’s Windows Phone, Research In Motion Ltd. and Hewlett-Packard Co.’s webOS) will have a mobile wallet. This environment will let shoppers select which type of financial transaction they want to use (debit or credit) and which financial services brand to make the payment, for example, Visa, MasterCard, Discover or American Express.
Google also announced Google Offers, which provides advertising deals from local and online businesses that can be found online or sent through the phone. The service will enable customers to store credit card details, offers, loyalty cards and gift cards on their handset, so that when they tap against compatible payment points payments can be made, offers redeemed, and loyalty points earned. Google’s Wallet and Offers work together so that customers can take advantage of offers and coupons when they check out with one click on the phone.
It would seem that other smartphone transactions such as boarding passes, car rental confirmations and other check-in activities could become a natural extension to the basic services. I expect that Apple and Microsoft will soon announce a similar virtual wallet and loyalty offers much like Google’s.
It’s important to realize that this tap and pay concept requires an NFC chip in the phone. I have pointed out for the past few years that smartphone manufacturers need to embed the NFC chip in all of their smartphones. With this announcement from Google and others to follow soon, I predict that within a year every manufacturer will consider NFC a checklist item that has to be included in every smartphone product. Most analysts expect to see 50% of smartphones NFC enabled by 2014.
Security is also important as no one wants to have the phone stolen and used to make unauthorized purchases. The wallet app will require a personal identification number for each use as will the overall transaction at retail facilities (just as is necessary now). The financial institutions say that all purchasing will be guaranteed with credit cards.
Soon, you’ll select items in a store, scan them, and then select the payment method in your mobile (virtual) wallet. You’ll enter a PIN and tap the point of sale terminal which will record the payment and print the receipt. In 10 years, we’ll wonder how in the world we got along without it.
J. Gerry Purdy, Ph.D. is Principal Analyst, Mobile & Wireless at MobileTrax L.L.C. As a nationally recognized industry authority, he focuses on monitoring and analyzing emerging trends, technologies and market behavior in the mobile computing and wireless data communications industry in North America. Dr. Purdy is an “edge of network” analyst looking at devices, applications and services as well as wireless connectivity to those devices.
