Google could drive Google Wallet adoption by limiting carrier access to Android and keeping OS innovations to themselves.
5 months ago I decided to double-down on Google and purchase the contract-free Nexus 4 phone directly from the Google Play online store. To buy the phone, the check-out procedure guided me toward using a Google Wallet account to pay for the online purchase. The shiny new phone arrived and when I started to set it up, I was prompted to create a Google Wallet account during the guided walk-through. When I went to download apps (free and paid), Google Play required that I associate a credit card with a Google Wallet account. Seeing a pattern here?
Google is deeply invested in having a direct line of payment with each and every customer. And rightfully so. Back in 2001, Apple required a credit card with each new iTunes account and ushered in a new era frictionless micro payments to feed our hungry white iPods with new songs. It was fun, impulsive and addictive to go on digital content shopping sprees and rack up hundreds of dollars with a few quick clicks. Those same accounts were then tapped in later years to rent movies, buy books, apps and their incremental in-app purchases. Connecting customers with easy, one-click purchases has built Apple, Amazon and others into shopping power-houses… while conditioning consumers to wave off micro purchases as small splurges, requiring little consideration and even less effort.
These frictionless digital payment behaviors–made popular online–are increasingly on the rise in the real world… especially for sub $25 purchases (the ones that no longer require signatures). Waving cards and phones with NFC chips to pay for goods is expected to surpass $90 billion in 2017, up from $12.8 billion last year (Forrester Research). Dozens of companies (Square, PayPal, Intuit, PayAnywhere), credit cards (American Express’ “ExpressPay,” Discover’s “ZIP,” Mastercard’s “PayPass” or Visa’s “PayWave”) and group collectives (Isis, MCX) have been scrambling and piloting mobile payment systems in recent years. The future of m-payments will have them likely falling into one of two camps: those who pay fees or those who collect them. It is a retail land grab of epic proportion and everyone needs to bet on at least one horse in the near future.
Google is in a very interesting spot. They have existing relationships with customers via dozens of free software offerings, search, advertising and increasingly as users of their operating systems. Outside of their relatively new Chrome OS releases, 7 year-old Android now accounts for 75% (IDC) of the world’s smartphone operating systems with another 1.3M new activations a day. While open source, it is conceivable that Google could start holding back on sharing the latest versions of Android OS updates with phones sold through carriers that block the Google Wallet app like Verizon, T-Mobile and AT&T. Ironically, users of these phones currently need to establish Google Wallet accounts to download apps from Google’s Play yet cannot use the Wallet app for ‘tap-and-go’ NFC payments at coffee shops nor vending machines.
With the trend of the Google Nexus line of native mobile hardware as well as the fruits of the Motorola acquisition about to emerge with the eminent Moto X launch, it is plausible that Google will start to keep the latest OS updates to themselves for a longer periods of exclusivity to further differentiate their own products. They can also use it as leverage when lobbying carriers to lift the embargo and allow customers the option to decide their NFC payment app of choice.
Since I could, I chose to set-up the Google Wallet app and use Straight Talk
(TracFone reselling pre-paid T-Mobile/Sprint) as my carrier for the new Nexus 4 and now enjoy buying my Peet’s morning coffee with a quick tap.