Google Wallet: Winners and Losers

Posted: May 26, 2011 in credit card companies, Google, NFC
Tags: , , , , , ,

Google just finished announcing Google Wallet. This is their NFC based payment system. In reality it is a lot more. You can read the details here. I have talked about this before. I don’t want to regurgitate details already covered but I do want to cover a few obvious items and some not so obvious one. The first involves why Google is doing this in the first place. In the near term (more about this later) they are making nothing on the transactions run through Google Wallet. The seeming financial beneficiaries are the store involved, the credit card company and the clearing house. We must ask our selves what Google’s business model is. It’s advertising. Targeted advertising is more valuable and hence able to fetch a higher price than random advertising. In the near term this is all about knowing who you are, where you are, and how you spend your money. If you are getting a little edgy about your privacy there’s a reason. You won’t have any. Google already knows more about you than the government does and that knowledge base is growing. Google Wallet extends that knowledge base. You do get benefits in return. For giving up your privacy you will gain ease of use and discounts on your purchases.

Watching the players in this was interesting. Each took their assigned segment. Google proclaimed they were the altruistic software provider that happened to make money on advertising but nothing else. Sprint  was happy to be the carrier placing the services on the phone. Citi wants to be the bank involved, Mastercard the credit card company and lesser known First Data the clearing house. Then there was the lineup of retailers happy that it would be easier to part you from your money. In many ways, players like Mastercard, First Data and Citi have little choice. This is going to happen with or without them. All of these players will be near term winners. I wonder, however, if any of them have a little fear about the long term future. The immediate losers are companies like Groupon. The retail coupon business is slipping into a Google business unit. Groupon isn’t a very large outfit nor are the others like it. I doubt many will see this as a big deal. A bigger potential loser is PayPal. Not mentioned was the fact that Google Wallet will quickly pick up the capability of PayPal. All of this is relatively near term. What happens later as mighty Google and it’s rivals Apple and Microsoft seek new avenues for increasing revenues? Google, with the world’s most powerful computer network, will have to ask itself why so much of this process, including the profits, goes to others. Perhaps they will decide to become the clearing house and edge out First Data. After that perhaps Mastercard will be a target. I doubt they will want to be your bank but who knows. Some of those faces that were smiling today might be wearing frowns in ten or fifteen years.

For the consumer, Google Wallet and related moves will mean a further increase in retail efficiency. Generally this is a good thing. Purchasing will get easier and tracking purchase will get easier too. Lost receipt issues will go away. Coupons will be easy to use and not a low paying paper cutting  job as it sometimes seems. While privacy will diminish, it will mean advertising that is relevant and generally useful.

I’m a semiconductor guy. What does this mean for the chip business? It means volume in everything related to this process. It means smartphone sales, and the chips inside them, will increase. It means lots of readers being deployed so stores can accept Google Wallet. The reach doesn’t stop there. Behind all of this will be massive data centers and a lot of network bandwidth. That means all of the chips that support these areas have a bright future.

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Comments
  1. Cathe Conner says:

    I found this article quite interesting but I do wonder about some things. What about folks like myself, I don’t do Pay Pal, I have only VISA no MC, why because MC wasn’t accepted abroad but VISA was. Why use American Express – why should I have to pay a fee to use their card when I get the same services and sometimes even better service with free cards. Also, I mainly like to deal in cash if I go to the store – so I feel like what I am reading I am going to be forced into something I don’t want. Looks like cash is going by the way side. It has only been a year since I started using a debit card for my cash. So are you saying this is leaving also.

    Personally I don’t want to get mixed up in this stuff. I lost my identity once and that took about 2 years off my life, I am very careful and aware of who doesn’t have any info on me. I can’t see identity thief red flags big time as I read this. Sure it is going to make you semi-conductor gurus look good but what about safety and personal safety. I really think you gurus need to realized that personal safety is a great issue, no matter how many pens numbers, passwords, etc., it is like a lock on a door – only for the honest folks. Someone wants to get into you information they can and will.

    Personally, I like carrying my wallet around along with my driver’s license and passport – gives me a secure feeling and that I am control of me and my identity.

    • paulplatt says:

      Credit cards will become more like money is today. You will be able to use them but it will be more of a pain. Today there are many places where a credit card is much easier than using cash. This trend will further push cash further down the list of accepted payment forms. One enticement form this will be currency fees when traveling abroad. At least currently, the plan is to eliminate the foreign transaction fees that you get hit with today. Google wallet and similar systems will be the easiest way to pay for things when traveling abroad. As for identity theft, Google Wallet has the potential to be more secure than a credit card. For example, I won an iPhone. If it gets stolen I have the ability to remotely wipe my phone i.e. delete everything on it. If my wallet gets stolen I can’t do that. When it comes to transactions, cash will always be the safest. However, you are an anomaly. For most people, the credit card has become the primary form of payment. The efficiencies (read better selection and prices) brought by online retailing will push even the hardcore to credit cards and eventually the electronic wallet although they may be kicking and screaming when they go.

  2. […] Google Wallet: Winners and Losers […]

  3. funeral.com says:

    Good job! what a great post!

  4. You make a lot of good points on this blog. Keep up the great work.

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