Verizon Wireless’ decision to deny Google Inc.’s mobile wallet a place on the upcoming Samsung Galaxy Nexus smart phone likely has more to do with compensation than security, some observers contend.
Multiple media reports earlier this week suggested Verizon is blocking Google from including the mobile-wallet function on a Nexus phone that runs on the Android operating system. Verizon claims such reports are misleading.
“Verizon does not block applications,” a company spokesperson told PaymentsSource 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 spokesperson says. Google Wallet needs to be integrated into a new, secure and proprietary hardware element in Verizon’s phones, the spokesperson adds.
“We are continuing our commercial discussions with Google on this issue,” he says.
Rick Oglesby, senior analyst with Aite Group, 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.”
Indeed, Verizon is involved with Isis along with AT&T Mobility 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. Last month, 45 partners of the GSM Association mobile operator trade group agreed to support Near Field Communication that uses SIM cards (
Nick Holland, a senior analyst with the research firm Yankee Group in Boston, notes the idea of compensation to allow a mobile app to reside in a phone is not typical in the marketplace. “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 notes.
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.
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