If you look through the blog you can see my reasons for this skepticism. It’s never been about the technology – that capability has existed for years. It’s about the infrastructure, consumer readiness and not adding fees for the service. I’ve been thinking about last week’s announcement around Google Wallet, and it could work – in Canada at least. Let’s discuss just a few reasons why their model could work.
NFC acceptability at POS – While articles I have read about the US and Europe have indicated that they have not adopted NFC strongly, numerous Canadian retailers have built NFC into their infrastructure as they were forced to spend millions on getting EMV in place. The EMV upgrade caused thousands of pinpads to be replaced, and untold hours of software changes and testing. It only made sense to include NFC in that process to make best use of the investment.
This investment places Canada in a solid position on the number of POS sites that can accept NFC payments. Not convinced? Consider just a few of the major retailers that accept contactless in Canada: Tim Horton’s, McDonald’s, Loblaws, Sobeys, Cineplex and probably many more where I haven’t used my NFC cards yet. (Let me know if you’ve seen it elsewhere in the comments!) More sites where an NFC tender can be provided means more potential purchasing locations where a Google Wallet can be used, which drives potential use, and therefore more potential adoption.
One PIN to rule them all – Canadians have become accustomed to Chip and Pin over the past few years. The unforeseen challenge of this new and more secure system is remembering PINs for multiple cards. I have relatively few cards, but have 3 credit cards and a debit card. Try keeping 4 pins straight in your head for whichever card you are using. Using the same PIN for all four? If you get filmed entering your PIN, you could be scammed on all of your cards.
If you use an NFC credit card, most retailers don’t require a PIN for purchases under a pre-set amount – generally $50 or so – particularly for their own cards. I like using them for that reason alone. Not entering a PIN at every transaction is a convenience to users and can speed throughput for retailers. At the same time, having a single PIN on the Google Wallet means that the card could not be used unless that PIN has been entered, providing an extra layer of security for an NFC transaction.
Usability – I’ve highlighted that any new payment solution needs to be extremely simple to use. Your most novice user needs to be able to do this in 5-10 seconds flat in front of a queue of impatient people and a bored cashier. The Google Wallet with NFC appears to get closer to this nirvana than other solutions. My technologically challenged mother uses NFC cards regularly and loves it. You “Tap n Go”. Consumers can use the current pinpad at the POS just like they have done for years. It’s comfortable.
Contrast this interface with Square as one example. Square is an awesome idea and it looks slick, but is my mom going to use it? Nope. Too foreign. It also requires the use of a solid data connection to work every time as transactions are completed via the network. Anyone want to be held up relying on your local wireless coverage to complete a transaction? NFC gets around that by allowing the use of NFC which just requires the mobile device to be on.
Will my mother use this solution? Probably not right out of the gate. But a mobile wallet needs to be this simple to get widespread traction in the marketplace. For those of you who may deride this need saying that our Gen Y digital natives are more sophisticated, watch your average mobile user at any point of service.
Many citizens (I didn’t say all – and they aren’t the only ones!) of this segment are so busy checking texts, talking on their mobile, or zoned into their own world listening to their iPod that they are often loathe to interrupt to complete a transaction. Mobile wallet usage needs to be so simple that one can open the app while they complete other activities while distracted.
I would also argue that Gen Y, while potentially more comfortable and trusting of technology than older consumers, are still subject to the needs of a simple user interface. They are not necessarily any better at using technology.
Increasing Mobile Usage – While Canada lags behind the US in mobile technology, we are catching up. 99% of the 18-34 set have a mobile phone. We are up to almost 25% of mobile phones with a data plan. A target market of 25% of the population isn’t a bad starting point, and it will only grow. This increasing use of mobile is also driving increased comfort with downloading apps like the mobile wallet. Android is also gaining market share – providing a potential foothold.
The Google Factor – Past attempts at mobile wallets in Canada have been pilots inevitably involving a mobile carrier, a credit card company, and a bank. Sometimes a credit card processor and/or a retailer got into the mix. All parties have been trying to figure out a way to split the profits for years – nobody has made it work.
Neither consumers or retailers will pay a significant fee for the privilege of carrying their phone instead of a piece of plastic. There has been no large monetary benefit to these parties to add additional cost and risk into the mix for the returns they have found or we would already have mobile wallets. The carriers and handset manufacturers have not included NFC into the mobile handsets as they had no incentive to do so, and importantly – no universal application to leverage NFC if it were there.
Another problem is the issue of consumer acceptance. Carrying a mobile wallet for every credit card, bank or other institution adds complexity, it doesn’t remove it. Having a mobile wallet from some Silicon Valley start up you’ve never heard about – not going to do that either.
The difference here versus the past is that Google is looking for an edge over Apple and RIM. They want and need to provide something the iPhone doesn’t have. The handset manufacturers also want in on that. NFC is a viable option they can provide.
To use that hardware, a universal mobile wallet from a trusted source is needed. Google is a verb now – who doesn’t know Google. The name Google Wallet doesn’t make you nervous – it makes you want to download the app. They also provide the corporate clout needed to deal with the major banks and credit cards.
They are providing the hardware we could never get in the past, and a universal app that could allow us to use all of our credit cards in one trustworthy mobile wallet. These two elements, along with the benefits above, may just push Google Wallet into mainstream usage.
This isn’t even remotely a slam dunk. At present this is going to be used in two test markets. It only works with one phone. It’s not offered in Canada yet. There is no guarantee the credit card companies will get on board. There will always be security issues. EMV could force you to pull out your card anyway for a larger purchase. If your battery is dead you have no wallet.
Many hurdles need to be overcome, but Google is moving us closer to the mobile wallet than ever. Perhaps they could offer it on other platforms like Blackberry and Apple’s iOS. Ideally Google’s initiative will drive other organizations to come up with their own wallets. Paypal – perhaps. Apple is likely to get in on this as well. Having organizations like this behind a mobile wallet initiative can only move the ball forward. After all, what’s left to add to our mobile gadgets?