Is Google Planning to Collect Interchange Fees on its Wallet?

As Google shifts its digital wallet strategy this week, there is a push to pay attention to the most pressing news: Now, you can place any card in the search engine's cloud-based card carrier.

This takes away choice from banks, and places consumers in the driving seat when deciding whether or not to use Google Wallet.

Still, the way the company handles transactions has fundamentally changed. The Cupertino company now acts like PayPal. It has become a merchant of record. Google sits in the middle of its Wallet transactions, rather than just passing through plastic credentials to an NFC enabled smartphone.

The transaction economics "are no longer obvious," says Celent senior analyst Zilvinas Bareisis, in a blog post.

"In the initial set-up, Google was clear that they would not take a cut on the payment transaction and the merchant would have paid a standard fee depending on the card used," he wrote. "Now, from the merchant point of view, they are accepting a prepaid MasterCard, while it might an Amex card that actually funds the transaction."

That has created a lot of questions, Bareisis says:

"Does it also mean that Google Wallet will have to establish relationships with the acquirers to re-coup from merchants any potential differences in transaction costs? Or will it have to charge the end user for 'loading' their wallet, something that other prepaid card providers do for card-based re-load transactions?"

Still, some analysts believe that, while Google's intentions are unknown, it's unlikely that they'd want to start collecting interchange — at least until the search engine company first started to profit from advertising revenue associated with a person's use of Wallet.

"To fully do that, they would have to stop pissing off the regulators when it comes to privacy matters," says Jim Van Dyke, president and founder of Javelin Strategy & Research. "Which is a good example of why non-financial companies avoid the more heavily regulated financial sector."