Google May Share Digital-Wallet Revenue with Carriers

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Google Inc. is considering sharing Google Wallet revenue with carriers to get them to support the technology, which lets users pay for items at checkout by tapping phones on a reader device, said people who asked not to be named because the discussions are private.

Few phones have the right technology installed to make Google Wallet payments, and rivals are readying their own systems, including one called Isis that's backed by carriers.

"They are in a bit of a re-evaluation pattern right now," said Rick Oglesby, an analyst at Boston-based research firm Aite Group. "It's going much slower than anticipated."

One of the two original creators of the Google Wallet software, Jonathan Wall, left Google this month to start his own company focused on mobile shopping, Tappmo Inc. Marc Freed-Finnegan, lead product manager for Google Wallet, also departed to join Tappmo.

Google said it's enthusiastic about Google Wallet's progress so far. The company is enlisting retailers such as the Pinkberry frozen-yogurt chain, which announced this week that it is using the system. Google Wallet relies on a system called near field communications, a wireless standard that works from within a few inches.

"We continue to work hard to develop Google Wallet and build the partner ecosystem to make it possible for everyone to pay with their phones and get great deals while shopping," Nate Tyler, a spokesman for Mountain View, Calif.-based Google, said in an e-mailed statement.

The mobile-payment market has drawn scads of competitors, including startups and more established companies such as Visa Inc., all aiming to capitalize on the growth of smartphones. The idea is to free shoppers from having to carry credit cards or cash — they just need their handsets. Mobile-payment transactions will top $170 billion by 2015, up from about $60 billion last year, according to Juniper Research.

As the owner of both the world's most popular search engine and smartphone operating system, Google has an inside track with consumers. Still, it lacks the support of the two biggest U.S. carriers, Verizon Wireless and AT&T Inc., which are backing the Isis system. For now, Google Wallet's NFC functions work on only two phones from Sprint Nextel Corp., the third-largest U.S. carrier. While 50,000 to 100,000 people have downloaded the software, only a small percentage use it, Oglesby estimates.

"The reception has been lukewarm," said Chetan Sharma, an independent consultant focused on the wireless industry.

The proposal to share revenue with carriers would involve the coupons and special offers that run on the Google Wallet app, the people familiar with the matter said. Carriers might get a cut of the proceeds when consumers accept the deals.

"Today, the operators have no incentive to adopt Google Wallet, given that they have their own ambitions in this space," said Sharma, who is based in Issaquah, Wash.

Carriers aren't making it easy for their customers to use Google Wallet. In December, Verizon blocked the app from its new Galaxy Nexus smartphone, citing security concerns.

"We are continuing our commercial discussions with Google on this issue," Brenda Raney, a Verizon spokeswoman, said in an e-mail. Mark Siegel, an AT&T spokesman, declined to comment on whether the carrier might offer the app in the future.

Another option Google is exploring: sidestepping the carriers altogether and relying more heavily on in-store terminals to complete mobile-payment transactions, the people said. This approach could involve additional hardware or software for the terminals, coupled with software that runs on Google's servers, they said.

Instead of requiring phones to authenticate payments — something that needs assistance from carriers — the system might send transactions to Google's servers for approval and then clear it with the retailer.

Google is adding more employees to the effort, seeking to fill eight Google Wallet positions. Last November, the company folded its Checkout service, which lets customers make online purchases, into Google Wallet.

Sprint will introduce as many as 12 new phones able to run the Wallet app this year. Even so, Google's retail partners aren't seeing much traffic for now.

"We knew from the get-go we won't see a lot of volume," said Robert Notte, chief technology officer at Jamba Juice, which accepts Google Wallet NFC payments at 276 stores. "We are in very early stages of this."

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