Google's Payments Strategy: Divide and Conquer

Google has made more progress by splintering its payments strategy in 2013 than it did when it tried to provide a single, unified product.

Google Wallet is no longer just a Near Field Communication-based app that runs on Android phones on just one carrier. Today, it runs on all major carriers and handsets, but it is a distinctly different product for each device.

On fully upgraded Android handsets, Google Wallet is focused on contactless payments at the point of sale. On older Android handsets and the iPhone, it's a person-to-person payment app. On desktop computers and most tablets, Google Wallet is an online and mobile commerce system. Google Wallet is also a plastic debit card and a feature of Gmail, where it allows users to send funds as e-mail attachments.

Google has succeeded in getting Google Wallet on nearly every piece of technology consumers touch. But has Google Wallet yet succeeded as a payments product?

"Google makes no money on payments so they don't want to be a payment solution," says Richard Oglesby, senior analyst and mobile pay expert with Boston-based Aite Group. "They need to be an advertising and loyalty solution which is tied to offers, deals and rewards. That's where they need to focus, and that is where they have the most assets."

Such a transition will take place slowly over time, but Google is definitely focusing in the right places now, Oglesby adds.

"They have a strong customer acquisition channel via Android and Google Play, but they needed to get consumers to adopt the wallet outside of the Play Store," Oglesby says.

To reach that goal, Google added new capabilities such as P2P, and began integrating the wallet more completely with other Google services, Oglesby adds.

The ace up Google's sleeve may be Google Glass, the wearable computer that is still in limited release. Early adopters of Google's high-tech headgear must purchase it with Google Wallet, and Google is creating an app store that could allow more ways to use Glass as a payment instrument.

MasterCard is testing ways to incorporate its digital payment products, such as QkR and MasterPass, into Google Glass. Smaller companies like LevelUp are also looking for ways to adapt their mobile payment systems to work with Google Glass. RedBottle Design already offers an app called GlassPay, which allows Google Glass users to perform bitcoin payments.

Google also acquired Bump Technologies in September, lending to speculation that it could use Bump's data-sharing technology for payments.

Google did not respond to inquiries for this story, but Pali Bhat, product lead for merchant and developer payments at Google, summarized his company's views during a presentation in October.

"People ask why Google wants to get involved in payments, but Google has been in the payments business for more than a dozen years with Google AdWords and Google Play," Bhat says.

Google wants to advance its payments strategy with the Google Wallet as the foundation for payments through Google Play, YouTube and other sites, Bhat adds.

It wants consumers to be able to make payments through the wallet app on Android and iPhone devices and with or without NFC. And Google wants advertisers to loop ads through Google apps or online, he says.

In other moves during the year, Google added a new checkout button for Android devices to support one-click payments. The company also put an end to the Google Checkout online payment service it launched in 2006, formally merging it with Google Wallet.

Google's latest version of the Android operating system, called KitKat, enabled much of the company's expansion of Google Wallet by adding Host Card Emulation, a software-based method of supporting NFC payments.