Is Google Wallet’s Mobile-Payment Strategy Getting Lost in the Crowd?

Launched last year, Wallet seemed to have a running start. Now it’s just one of many emerging options

By Cynthia Wilson, Consumer Finance & Funds Writer

Google (NASDAQ:GOOG) is trying to entice Verizon (NYSE:VZ) and AT&T (NYSE:T) into adopting Google Wallet, its mobile payment service, with a revenue sharing deal.

Google Wallet uses an app and near-field communication (NFC) technology embedded in phones to allow shoppers to wirelessly pay for goods, with a “tap” of their phone, at retailers equipped with NFC point-of-sale terminals. If it’s widely adopted, Wallet could allow Google to boost its share of mobile advertising revenue by targeting shoppers with coupons and promotions on their cellphones.

But Google is grappling with ways to connect consumers with Wallet. That’s where the nation’s two largest wireless operators could play a role: in return a cut of the revenue from coupons and special offers that actually yield sales, a Bloomberg story notes, AT&T and Verizon would make Google Wallet available on the smartphones they sell.

The offer, however, may be too late. Verizon and AT&T, along with Deutsche Telekom‘s (PINK:DTEGY) USA T-Mobile, have invested about $100 million in Isis, a rival smartphone payment systemthat could be released as early as this summer.

Competitors emerge

When it launched last fall, Google Wallet was expected to have the upper hand, given that Google is the world largest search engine and its Android operating system is so widely deployed in smartphones. But so far few phones are equipped with the necessary NFC technology. Sprint (NYSE:S) has agreed to offer Google Wallet to its customers, but it’s available on just two of its phones.

In addition, Google Wallet’s appeal had been at least temporarily diminished by now-corrected security flaws, and, beyond Isis, it faces competition from similar services, including one from Visa (NYSE:V) called payWave.

Shortly after Google Wallet was released vulnerabilities were discovered that would allow hackers to access users’ personal identification number, or PIN, unless the device’s screen had been locked using a lock-screen code. Another flaw allowed access to the phone’s application settings for Google Prepaid Cards (Wallet enables payment via credit card and debit card accounts, and through a prepaid account). Google ended up issuing Wallet users a $5 credit as part of an apology for service disruptions.

Now two of Wallet’s key managers, Jonathan Wall and Marc Freed-Finnegan, have left Google to form Tappmo, a rival mobile wallet service, and Google is looking for new strategies to keep Wallet afloat. Isis, meanwhile, has signed agreements with Chase (NYSE:JPM), Capital One (NYSE:COF) and Barclays‘ (NYSE:BCS) Barclaycard that will let consumers load their eligible cards into their Isis Mobile Wallet.

It’s possible that Google still may cement a revenue-sharing deal with Verizon and AT&T. But with Google Wallet struggling to catch on with consumers it’s clear that the wireless carriers will have a bigger say in how the deal shapes up.

Article printed from InvestorPlace Media,

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