As is now widely known, Google and PayPal are considering entering the mobile wallet space. At two recent conferences, executives from these companies presented information about their wallets and shared descriptions of how banks or merchants will get real estate in this emerging arena.
How it works
While much less was presented on PayPal's plans, it was clear their intent is to continue to work on a "cloud wallet" that can be accessed on mobile, online or any point of sale. PayPal intends to advance their wallet as an alternative for payment at large retailers, with a feature set that could be integrated with merchant loyalty programs.
On the other hand, Google & Isis intend to brand the wallet experience and slot bank and merchant applications into their framework as "tenants" with apartment-like accommodations inside the wallet. Wallet providers using this approach have "master keys" and act as a "landlord" with control over the "directory" and the "apartment assignments." Bank or merchant tenants retain a certain level of control to securely "furnish" their assigned apartment and brand it with their own identity.
Unlike the Android and Apple app stores, Google indicated they have no current plans to let banks, rental car companies or other merchants build independent applications that create and manage unique consumer experiences yet leverage "wallet services" such as the secure storage of card data. Hopefully, this model where the user experience is tightly managed by the mobile wallet provider is just an early limitation and will change as most attribute the success of Android, Apple and browsers to their shared services that enable creative participants to uncover compelling use cases.
While airline boarding passes, NFC smart posters and rental car and hotel room keys served as example use cases for the mobile wallet, the bulk of economic justifications for merchants and wallet participants were based on "commerce creation" – the general term given to location-based mobile ads and coupons for physical world stores. Google noted their effort would be "rent free" and completely ad funded. While participants can make money from "ad sense" traffic, no other ad network was currently planned to share monetization of the wallet.
I previously installed the Google search application on my mobile phone with Google News, Maps and Gmail access. It seems a natural place for Google to put offers and ads. It is not clear how the mobile wallet venue is better for these ads unless Google intends to use its free prepaid card and brand equity to gain access to consumer transaction data.
I have no problem with Google technology mining my email, even though a lot of the communication is pretty confidential, because they promise not to share it with third parties. I know they track my searches to try to make ads more relevant to me. Will I now give them access to my transactions so they have an even more intimate view into what I do when I am not on the Internet? Would I do this just so that the ads Google gives me are better or to simplify redeeming offers?
Given that only 8 percent of consumer purchases are conducted online, offline transaction data could be more than 10 times as valuable as online interaction and spend data. The company's key search asset utilizing "page-popularity" and related analytics is not the best predictor of relevance or quality in local or offline spending. Indeed, Google's recent purchase of Zagat is a great indicator that the company is aware of their current limitations. Many see transaction data as the Holy Grail for advertising measurement and the key to unlocking both local and mobile advertising revenue streams.
Bank transaction, account management and settlement products are increasingly commoditized and regulated. Transaction history, just like deposits, is an important bank asset that can be used to create new and compelling products. Can banks afford to lose the opportunity to monetize it in exchange for an apartment in a wallet?
There are people at Google who believe transaction data will be commoditized and that everyone will have access to it. Will banks or consumers be wooed by the Google wallet into giving Google use of transaction data for free? Will fee-free prepaid cards become the Gcard, following on the success of Gmail replacing fee-based accounts like AOL and other providers and become advertiser-funded free accounts?
Given the lack of success from these "multi-tenant" approaches over the past 20 years in online and mobile banking, it is a strong possibility that the future could look similar to the current landscape of bank-branded experiences, but the spending power and momentum of the brands involved makes this less certain than many may think. The real question remains: Will Google, PayPal or others expand their relevance as a platform for transaction-enabled commerce, or will banks expand their role as an efficient new medium capable of redefining the way we match merchants and customers?
Joe Salesky is founder and chief strategy officer for FreeMonee Network.