Google Wallet

NICHE

Google Wallet is a smart phone app released by Google in September 2011. Very similar to ISIS, Google Wallet hopes to help consumers by consolidating the contents of their wallets (credit cards, debit cards and gift cards) into their phones, adding convenience and reducing clutter.  Like ISIS, Google Wallet is installed as an app that takes advantage of NFC technology, allowing consumers to pay by simply tapping their phones on a terminal. Although technically NFC is capable of processing peer to peer transactions (for example, by bumping phones), neither Google nor its main competitor have pursued that market yet.

BUSINESS MODEL

One difference between Google Wallet and ISIS is in the revenue model. Whereas ISIS has aspirations of charging major credit card networks to use its ISIS system through direct fees or taking a portion of interchange, Google Wallet plans to make money by selling targeted advertisements. However, since Google Wallet and ISIS are both in early stages and currently focused on acquiring market share, no definite revenue model has been adopted yet – some reports speculate that Google Wallet may adopt a model more based on transaction fees, and others claim that they will use their relationship with Bancorp (see below) to extract an interchange fee.

CEME Presents: Google Wallet, part of the ABCs of Payments Series. CC-BY-NC

CEME Presents: Google Wallet, part of the ABCs of Payments Series. CC-BY-NC

To truly understand the competitive dynamic between Google Wallet and ISIS, however – and to understand what impact this has on the future of NFC and potential revenue models – it is important to discuss the technology a bit further. As discussed in last week’s blog, NFC is simply a new hardware that allows two electronic devices to communicate – it is comparable to something like Bluetooth or RFID. Devices using NFC communicate to one another using a process called inductive coupling; basically, one device passes electricity through a metallic coil (basically an antenna) creating an electromagnetic field. If this field engages another metallic coil, a current is induced within the first coil. This current can then be translated into data.

What’s important to remember at this point is that NFC has many practical applications outside of simply payments. For instance, imagine you had an electronic business card saved on your phone. With NFC, you could transmit your business card to another NFC enabled phone by simply holding the phones next to each other, and then running an app to activate the transmission. Another application of the technology involves NFC tags. These tags are tiny stickers that store a small amount of information that can be read by NFC devices. So for example, an advertiser might make a promotional poster for a movie with an embedded tag. Interested patrons might then hover their smartphones over the poster and be automatically directed to a website showing the movie’s trailer. NFC tags can also be programmed and reprogrammed for personal use. For instance, an individual might program a tag so that it automatically sets his phone to silent mode whenever it is read.

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