Google Inc. isn’t asking for a share of the payments revenue generated with its new mobile wallet. Nevertheless, partnering with the search engine juggernaut could be a trade-off for banks.
Google plans to make money through an associated service in which merchants pay to display coupons on the phone screen. Banks may be leaving money on the table if they allow Google to keep all of that advertising revenue for itself, some experts said.
“For Google not to give them a piece of that revenue pie from the promotions … forget it. I wouldn’t do it,” said Brad Strothkamp, a principal analyst at Forrester Research Inc.
The Google Wallet app allows a consumer to load her debit or credit card information into a mobile phone that runs on Google’s Android operating system. The consumer can then pay for purchases by tapping the handset against a terminal at the checkout counter. The allure for banks is that they stand to capture a greater share of a consumer’s spending if the card can be used so easily.
But Strothkamp said there is a precedent for banks taking a cut of the kind of revenue Google will collect — many vendors offer merchant-funded reward programs that share revenue with banks. These vendors could attach their programs to mobile payment apps, Strothkamp said.
Peter Ho, the product manager for card services and consumer lending at Wells Fargo & Co., would not say whether it plans to work with Google, but he said the wallet service is a positive development for mobile payments.
“One of the neat things about the Google announcement is they’ve taken NFC” — near-field communication technology — “beyond payments, and I think that’s a significant thing in terms of … why banks are paying attention to it,” Ho said.
Still, he said that signing on would be a compromise compared to banks’ previous approaches to mobile payments.
The release of the Nexus S, the only Android smartphone that includes an NFC chip, “changed the game a little bit,” Ho said. “Suddenly the bank is no longer the owner of the wallet, like it or not. If we want to play, we kind of have to be part of this mixed wallet or this open wallet because that’s about the only way we’re going to be able to get onto that phone.”
Google’s system is built on NFC technology preinstalled in Android smartphones, a cleaner integration of NFC technology than what many banks have used in trials.
Wells Fargo and U.S. Bancorp, for example, are testing an add-on memory card with an embedded NFC antenna, provided by Visa Inc. and DeviceFidelity Inc. Wells Fargo is testing the memory card with 200 employees in San Francisco.
“It’s a bridge technology,” Ho said. “We’ve always intended it to be a bridge technology in the sense that … there would be NFC handsets in the market in the future.”