23 October 2014

Brett King

Brett King - Moven

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Google Wallet is not about Payments

06 June 2011  |  9616 views  |  1

Last week Google announced their long awaited NFC-trial for mobile payments. On the face of it, many perceive that Google’s play is an attempt to cannibalize the lucrative payments market, but if that was the case, why has Google not taken a share of interchange fees from Citi and Mastercard? In addition, Google is supplying contactless point-of-sale units to merchants participating in the upcoming NFC trial free of charge. Why on earth would they do that?

It doesn’t make sense

In early May the Smart Card Alliance conference held in Chicago, Wal-Mart’s Jamie Henry was asked directly about the retailers plan in respect to point-of-sale. His reply was telling:

"We’re interested in helping to migrate EMV to the U.S. market. We view it as a much more secure transaction, and we want to provide our customers with the most secure transactions in the market place," Jamie Henry, director of payment services with Walmart treasury organizations (source: NFC News)

Henry has said that 100 percent of Wal-Mart’s terminals already support EMV cards. However, when asked recently at the Smart Card Alliance Annual Conference about the role of NFC or contactless technology in the greater POS environment in the US, Henry was reported as saying

“There’s no business case for NFC yet”

Many bankers take a similar stance in respect to mobile payments support for NFC phones, stating that until contactless point-of-sale terminals have broad enough distribution, customers won’t be able to make use of their NFC phones and thus the expense of rolling-out a trial and investing in the supporting technology would be premature.

So why would Google, who admittedly have some pretty smart people in their team, not only invest in an NFC-trial, but also give away NFC point-of-sale terminals free of charge to partner merchants?

Maybe it does make sense

The thing is, Google sees the big picture.

NFC is not about payments modality alone. It’s not simply the shift from chip and PIN or contactless plastic to contactless mobile payments. It’s about what the mobile phone can do as a payment device that a plastic card can’t – it can give you context.

For example. The number one enquiry to retail banking call centers today is still “What’s my account balance?” Combining that piece of information with a payment device gives you a very powerful context for your everyday personal financial management.

If you are focused on a savings goal, I can show you the potential negative effect of making a big ticket purchase.

If you are at a retailer about to use a competitor bank’s credit card, I can offer you a no-interest payment plan through my bank.

I can tell you if you purchase that big flat screen TV that you won’t be able to make your mortgage payment due in the next 3 days.

I can offer you a really great deal at a retail outlet that you just walked into or you are walking past.

Google has worked out that the context of payments is perhaps the biggest advertising market ever to emerge, far more impactful and lucrative than search-based advertising. This is about offering you compelling, relevant and timely messages that improves your service experience in-store. This is about positive behavior on the part of your service providers that produces extraordinary loyalty through relevancy and responding to your behavior in a way that benefits you day-to-day, not just when you ask for something.

The future won’t be written by banks and marketing organizations that are passive. It won’t be written by marketers who broadcast message after message hoping you remember their brand when you want to make a purchase.

The future will be written by organizations who know you so well that they anticipate your needs, make it very simple for you to capitalize on the relationship, and an organization that saves you money and respects your time and privacy. Trust can be earned back, but it is about me trusting you enough to receive your offers and you not burning that trust with irrelevant direct mail, newspaper ads and TV commercials.

The future is messages wrapped around the context of a payment, and Google wants to own that space. It doesn’t look as if there’s really anyone ready to challenge them on that front.

Whatever you think of Google Wallet, it’s clear they have probably the most compelling business case of all for pursuing NFC payments, and it has nothing to do with competing with banks, but everything about owning the customer.

Google Wallet is a platform for Payment-based marketing TagsMobile & onlinePayments

Comments: (1)

John Dring - Intel Network Services - Swindon | 09 June, 2011, 13:10

Brett,

Spot on I think.  Google have managed to do what many MNOs have not managed, or are too cautious to try - which is work with the incumbent card payment providers and allow them to continue to process the payment.  Google see the value in other things around the payment itself, whereas most Operators are competing to have the payment applied to their customer billing relationship (and then worrying about their risk).

The MNO trials of NFC seem to be more about dipping a toe in the water and selling a few NFC enabled Smartphones, than a serious m-payments offering (no MNO wallet).

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