Google launches Google Wallet; what are its growth prospects?

Google and its partners (Sprint, MasterCard, Citi and First Data) officially launched the Google Wallet mobile payments app yesterday.

At the same time, Google licensed Visa’s PayWave contactless payment technology.  And both American Express and Discover signed on as Google partners.  With these companies now on board, Google is starting to build a strong partner ecosystem.  In so doing, Google Wallet competing with other emerging mobile payment systems (such as Visa’s own Digital Wallet as well as the Isis consortium), in getting the strong array of partners in place.

Building a partner ecosystem will certainly help to strengthen the various mobile payment offerings.  However, the emerging mobile payments sector will need to overcome a range of key hurdles in the coming years.  Two of the most significant hurdles are:

  • Merchant acceptance: only a very small percentage of merchant payment terminals can currently process mobile paymment transactions.  Mobile payment providers will need to focus initially on spend categories and merchants that are most amenable to mobile payments, and over time expand to other merchant categories.
  • Consumer adoption: Cash and cards are established and relatively convenient forms of payment, and will be very difficult to dislodge.  Mobile payment providers will need to build awareness of mobile payments as a spending category, and communicate mobile payments’ key advantages over establish payment methods (e.g., speed, convenience, as well as the ability to receive special offers at the point of sale).  In addition to marketing the categories, individual mobile payment providers will also have to differentiate their own offering from direct competitors.

With these hurdles in mind, it is notable that American Banker this week quoted a MasterCard executive as referring to Google Wallet as a “five-to-ten year effort, not a one-year effort.”