When Google announced it was upgrading its Wallet this week, it did more than just allow the consumer to place any payment card into the company’s cloud.
Behind the curtain, Google was changing nearly everything about how it handles those transactions.
As I wrote on American Banker:
With the cloud-based wallet, Google acts as the merchant of record. It presents only the virtual card number to brick-and-mortar retailers. However, Dua says, issuers still receive the transaction data from Google Wallet purchases. With the directly enabled Citi card or Google’s prepaid card, Google still presents the actual account number to merchants.
The new feature builds on Google’s recent acquisition of the prepaid card processor TxVia .
On Celent’s blog, Zilvinas Bareisis said the biggest unknown is the new system’s impact on merchants:
That’s because the transaction economics are no longer obvious for Google Wallet and is a question I am most keen to find out more about. 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.
Now, from the merchant point of view, they are accepting a prepaid MasterCard, while it might an Amex card that actually funds the transaction. PayPal deals with it by having direct acquiring relationships with its merchants and offering them a discount rate which represents an expected blend of funding transactions. 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?
The only people who really know the answers to those questions work at Google.
What do you make of Google Wallet’s makeover? Leave a comment below.
Sean Sposito is a reporter covering technology for American Banker.