In Mobile, Google Charts a Course that Banks Might Not Follow

To hear banks tell it, a location-based offer system has to be built around a digital wallet. But Google (GOOG) is showing that the bank may not be the chief component.

Google's recent move with Offers, a discount system it announced with Google Wallet a year ago, ties the offer system instead to Google's most prominent location app: Google Maps. In demo videos for the Google Maps app for Android smartphones, users load the map and see offers based on their location. There is no bank product or bank branding of any kind. Its videos don't even mention Google Wallet.

Google's decision to make Offers a feature of its Maps app seems to place more value on location data than transaction data. The app caters to users who want to find offers by exploring their surroundings rather than sifting through their past spending.

"This is about driving Google Offers today," says Ron Shevlin, a senior analyst at Aite Group. "They will get absolutely nowhere today and for the remainder of this year if those Google Offers are driven through the wallet."

For now, mobile shopping is much more prevalent than mobile payments, Shevlin says.

When Google announced Offers, its plan was to tie it to Wallet so closely that, according to a concept video released at the time, offers would be managed from within the Wallet app.

The Maps update changes that vision, but Google doesn't plan to sever Offers from its Wallet. However, such an unbundling would have a precedent. When Google launched its earlier payment service, Checkout, in 2006, the pricing was linked to its Adwords service. In 2009 that link was broken, and last year Google discontinued Checkout to move those customers to Wallet accounts.

The Maps decision isn't as drastic, but it shows Google is open to the possibility that its Offer system's success may not be tied to that of its payment system.

"Decoupling [Offers] from the Wallet is a good move for Google as it will enable broadened adoption and redemption of mobile rewards as the kinks are worked out on Google's mobile wallet solution," says Beth Robertson, the director of payments research at Javelin Strategy and Research. "Leveraging the geolocation tools available through mobile devices is an ideal way to promote rewards redemption."

Google is working on other ways to improve its Offers system. "About a month ago we started piloting something called Offers With Rewards, and that is linked to transactions, and I think it's fair to say that we think the transaction channel is superinteresting," says Eric Rosenblum, director of product management for Google Offers. "There are some really interesting capabilities that you have when you process an offer against a credit card."

Many companies are still laser focused on getting the most out of the data tied to payments.

Cardlytics, a rewards technology vendor, says it uses transaction data in addition to geolocation data rather than rely on location data by itself. Its "offers are based on people's historical purchases," says Lynne Laube, Cardlytics' president. "Giving somebody an offer just because they are walking by your store isn't compelling."