First Data Corp. will play several key roles in the launch of Google Wallet, and while analysts applaud the firm’s moves to capitalize on mobile payments’ growth, they note certain risks and uncertainties the company faces venturing into new territory.
The Atlanta-based merchant processor and acquirer is making its debut in the role of “trusted service manager,” in which it will load a consumer’s payment card credentials to a secure chip through a process called over-the-air provisioning.
“Provisioning consumers’ mobile-payment accounts over the air is definitely a newer area for us, but a lot of other elements of the role, such as being safekeepers of consumer card data and managing card lifecycles, are not new to us,” Dom Morea, First Data senior vice president of advanced solutions and innovations, told ISO&Agent Weekly in an interview.
And First Data is not going it alone in its new role. It will lean heavily on South Korea-based SK C&C Co. Ltd., an expert in trusted service management and e-wallet services, through a partnership First Data signed last year.
“Over-the-air provisioning of mobile phones for payments has had broader usage outside the U.S., and SK C&C has done a lot of it in Korea which, together with First Data, will result in a solid market-tested approach,” Morea said.
Analysts believe First Data is up to the initial task of linking Citigroup Inc. customers’ MasterCard accounts with smartphones manufactured by Sprint Nextel Corp. to enable two-way communications for payments via Near Field Communication technology. A trial recently was launched in New York and San Francisco, and Google said the service will be available nationwide within a few months.
But what remains unclear is how First Data will link multiple bank customers’ accounts through multiple card networks and devices, observers say.
“It’s not necessarily a huge technical challenge to put together a relatively small program like the one Google has outlined that only involves one bank,” Rick Oglesby, a senior analyst with Aite Group, said in an interview. “The big challenge comes when you try to scale it, getting multiple financial-services players involved. Then it becomes far more complicated. No one has done that yet, and the big gray areas are business questions, not technology questions.”
And as long as Google has not revealed how it plans to extend Google Wallet into a ubiquitous payment channel, the effort is “not much different” than other mobile-payment schemes proposed so far, Oglesby says. “I’m surprised at how very similar Google Wallet is to the Isis mobile-payment project and what Visa is working to develop in various markets.”
Another unknown First Data faces in its trusted service manager role for Google Wallet is the question of how versatile Google’s mobile-payment platform ultimately will become, some analysts say.
“The biggest question out there is how open Google plans to be with its open platform,” Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC, said in an interview. “To deliver on the promises Google has made will require the founding companies to get very innovative in designing these mobile-payment platforms from the start, and we have yet to see if the rhetoric matches the actions.”
First Data may have no direct experience acting as a trusted service manager, but the company’s proprietary Go-Tag contactless sticker, introduced in 2009, has helped to “inform” it on various aspects of the role it will play in connecting consumers’ NFC phones with their bank information, Morea said.
Besides the Go-Tag, First Data last year also began offering microSD cards supplied by Tyfone Inc. that contain an electronic wallet.
“We continue to support Go-Tag, and our work with these contactless and microSD applications are all part of the paving stones that got us to where we are being the (trusted service manager) with Google Wallet,” Morea said.
First Data also will lead the initial movement to recruit and set up new merchants to accept contactless payments to participate in Google Wallet, including providing merchants with contactless-payment terminals and the Google software merchants will need to initiate payments through Google Wallet, Morea said.
Morea said First Data also will “help sell” Google Offers to merchants, enabling merchants to give customers deals and discounts through Google Wallet, but he declined to provide more specifics on how Google Offers will be promoted to merchants.
Analysts say First Data’s various roles in Google Wallet’s initial phase will provide at least a short-term advantage, but it will be unlikely to endure when Google opens the program to multiple financial-service providers, vendors and networks, as it promises.
“At least initially, First Data has a big opportunity here to be the only company offering Google Wallet services, and it’s a window they should maximize before it opens up further to competitors,” Ablowitz says.
