Coming soon: make your phone your wallet
Today in our New York City office, along with Citi, MasterCard, First Data and Sprint, we gave a demo of Google Wallet, an app that will make your phone your wallet. You'll be able to tap, pay and save using your phone and near field communication (NFC).
Context & Ripple Effects
Two days after the Wall Street Journal reported that Google would unveil a mobile payments platform, the demo landed at Google's New York office: an NFC app built with Citi, MasterCard, First Data and Sprint that lets users tap, pay and save with their phone. The partner list is the story — Google is renting trust it doesn't have, plugging into MasterCard's existing PayPass acceptance network rather than building its own merchant base.
Sprint's role fits its recent pattern of differentiating through payment features, including April's rollout of carrier billing for Android Market purchases charged to Sprint accounts. Syndication was broad — TechCrunch, SAI, ReadWriteWeb and CNET all covered the launch within a day — with TechCrunch pressing Google on whether Wallet would ever reach iPhone, Windows Phone or BlackBerry devices.
First-order effects
- Citi cardholders on Sprint NFC phones get tap-to-pay at MasterCard PayPass merchants immediately, while Sprint gains a flagship feature its larger rivals' current lineups lack.
- MasterCard and First Data extend their processing footprint into a new device class without issuing new plastic, and Google inserts itself between the bank, the network and the consumer at the point of sale.
Second-order effects
- Other carriers now face a choice: license Google's stack or back competing NFC schemes, since whichever party controls the secure element controls the customer relationship.
- Merchants gain offers-and-loyalty integration at the register for free, pressuring point-of-sale vendors and coupon intermediaries to build NFC-compatible redemption flows or lose the attach rate.
Third-order effects
- If the pattern holds, the phone displaces the card as the permission layer for payments, shifting leverage from card issuers toward whoever owns the wallet software and the secure hardware inside the handset.
- The open question raised by TechCrunch's coverage — whether Google will partner across iPhone, BlackBerry and Windows Phone — determines whether this becomes a universal wallet standard or another Android-only perk.
The trend: Mobile payments are consolidating around the smartphone's NFC radio as the new point-of-sale credential, with carriers, banks and platforms jockeying over who holds the secure element.