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Four reasons Verizon's smackdown of Google Wallet is bad for banks and consumers.
December 7
Despite Verizon Wireless' talk of security concerns with Google Inc.'s mobile wallet, its decision to deny the payment app a place on the upcoming Samsung Galaxy Nexus smartphone may have more to do with money.
Multiple media reports indicated
"Verizon does not block applications," a company spokesman said in an email.
Instead, Verizon's concern is that Google Wallet is unlike other widely available mobile-commerce applications.
"Google Wallet does not simply access the operating system and basic hardware of our phones like thousands of other applications," the spokesman said. Instead, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in phones.
"We are continuing our commercial discussions with Google on this issue," he said.
Rick Oglesby, senior analyst with Aite Group, said he views that statement as meaning Verizon is still trying to determine the proper compensation for allowing Google Wallet into its phones.
"They would be happy to put other wallets on the phone as well as long as they are being compensated for it," Oglesby says. "They are denying this at this point in time, and I think they are really asking these other wallet providers to pay as a real-estate play."
Verizon is involved with Isis, a mobile-payments venture founded with with AT&T and T-Mobile USA. Isis has said it will use pilots in Austin, Texas, and in Salt Lake City next year to help determine the mobile-wallet experiences consumers want from their phones.
Unlike Google Wallet, which is embedded in phones, Isis places the wallet application inside the phone's SIM card, making it more portable.
It is not typical to demand compensation to allow a mobile app to reside in a phone is not typical in the marketplace, says Nick Holland, a senior analyst with the research firm Yankee Group in Boston.
"App developers don't have to pay a rental fee per handset to be on the phone," Holland says.
The real issue is that Google is still seen as a great unknown when it comes to payments, Holland says. "We're seeing that card issuers trust Isis over Google," he says.
Discover Financial Services, which issues its own cards and operates its own card network, also is involved with Isis.
"Issuers understand the Isis model better," Holland adds.
If Verizon's issue with Google really is over the secure element in the phone, there are ways around it, Oglesby says.
Google could choose to store sensitive data in a cloud-based system, which is similar to what PayPal Inc. does, Oglesby says.
"Will circumventing the secure element on the phone become the way to go for mobile-wallet providers?" he asks.
Holland and Oglesby both agree consumers ultimately could force Verizon to accept Google Wallet. "If there is a groundswell of uptake from consumers for Google Wallet, it's going to be fairly hard for Verizon or AT&T to ignore that," Holland says.
