Google and Sprint Partner to Bring Contactless Payment Solution to the U.S. Market

| May 27, 2011 | Consumer Services U.S.
| Analyst: Deepa Karthikeyan

Event Summary

May 26, 2011 - Google and Sprint, in partnership with Citi MasterCard, unveiled a new contactless mobile payment system, dubbed Google Wallet, compatible with the Nexus S 4G sold by Sprint. Google Wallet will use near-field communications (NFC) and GPS to let people use phones for commercial transactions. The app works with MasterCard's PayPass system, which is already installed in a considerable number of merchant stores and will support loyalty programs and automatically apply any earned discounts to the purchase. Google has also indicated that loyalty cards and receipts will be digitized. The system is currently being trialed in New York City and San Francisco, and will launch on a wider scale later this summer. High profile merchant partners include Macy's, Walgreens and Subway. Google also announced the launch of Google Offers, modeled similar to Groupon, which will provide users with daily deals, which can be accessed from Google Wallet. Google Offers is currently only available in Portland.

Quick Take

Analytical Summary

• Current Perspective: Positive on the upcoming Google Wallet solution as it not only features a promising lineup of high profile merchants and prominent (albeit limited) financial partners, but the initiative also stresses three factors critical to end users - ease of use, financial incentives and security. Google Offers, which promises aggressive discounts and is expected to sync with Google Wallet at launch time, will further increase the perceived value of the solution. However, the announcement is not without its share of hiccups. Details surrounding its official launch date and supported list of cities (outside of the trial cities) have not been disclosed, and so far only one device is said to be compatible with the service. The service will only support Citi PayPass eligible MasterCard credit cards at launch time, although users holding cards from other financial institutions can fund the virtual Google prepaid card and use it to make payments. Nevertheless, these limitations are not pressing and can easily be resolved in the next few months. For now, Google Wallet service is a very attractive offering and is likely to be the catapult that NFC-based payment solutions need to become mainstream.

• Vendor Importance: High to both Google and Sprint as the Google Wallet solution is a good start to further their mobile commerce ambitions. At the launch of ISIS (a mobile commerce consortium formed by AT&T, T-Mobile and Verizon Wireless), Sprint was the dark horse that wasn’t a part of the initiative and appeared to have no concrete plans on hand. Now Sprint seems to have the upper hand by partnering with Google’s solution that in all probability will gain national presence before ISIS. For Google, its Wallet solution is an additional means to sell advertising at a critical juncture - when a shopper is physically in a store, product in hand, ready to spend money and receptive to discount offers.

• Market Impact: Moderate to the mobile commerce segment as Google Wallet, though promising, is just entering trial mode and has yet to declare supported cities and hardware besides Sprint’s Nexus S 4G, which is critical to assess its impact. However, the solution is promising and will definitely up the ante for competitors such as ISIS who will now be pressured to hasten their launch timetable lest their offerings get outflanked by Google. Even as a trial Google Wallet will be the standard that upcoming initiatives will be measured against, and Google’s involvement will encourage the participation of mainstream merchants and financial vendors that will help further the technology.

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Current Perspective

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