Google due to announce new mobile payment system – is there room for them?

Google May 25, 2011 4 Comments

While it’s been a hot week for Square in the mobile payment space, Google, as ever are not far behind. It seems they are due to launch a new NFC (near field communication) mobile payment system. This was first hinted at over at TechCrunch, when they were tipped off about a live Google press event on a Youtube channel, that was taken down when they reached out to Google about it. Bloomberg have since confirmed this with sources close to Google, which coincides nicely with a planned press conference by Google tomorrow, that the major media have been invited to. This could mark an important next step for Google, as they struggle to get a foothold on the next big area to take off : mobile commerce.

Just what is NFC?

NFC as a technology is not new, but it’s adoption into the mainstream is. Put simply the NFC payment system would run on chips put into their Nexus phones (the Nexus S on Android) that allows people to pay for something by swiping their phone over they payment point. It is mobile payment made incredibly simple. Think of it like swiping your travel card when you get on the bus or underground : one touch and it’s done. And while the Google Nexus S phone already contains NFC technology, along with the Nokia C7 (disclaimer – Nokia are a client of ours), this hasn’t yet been exploited for mobile commerce by Google. And if they do roll this out, it will launch in five cities, according to Bloomberg : New York, LA, San Francisco, Chicago and Washington, DC.

Where are Google’s opportunities?

Google’s potential here is to take a technology that is incredibly easy to run from a consumer point of view, and bring it into the masses. This is no small undertaking. It’s one thing to introduce the technology for payment services on a mobile, but working with businesses to actually enable the physical transaction is quite another. This requires a huge effort if the launch is to be seen as yet another example of Google trying to get into the latest craze without really understanding it. And they face huge competition from Square, who can offer mobile payments without the need for merchants to change anything, as once you have the gadget you can accept payment by credit card – no other investment needed. It’s telling perhaps that Apple decided to delay the introduction of NFC technology in their phones until at least 2012, when it looked like it would be integrated into the iPhone4.

For context, Nokia (see disclaimer above!) smartphones in 2011 have all been equipped with NFC technology to enable wireless payments in the same way that Google are expected to announce. Nokia have the benefit here of being a popular handset choice among younger people, who are likely to adapt to new technology quickly. So Google aren’t announcing a new technology altogether here, which puts even more pressure on them to see what they will be doing differently to other smartphone manufacturers.

Mobile commerce is growing rapidly, but there is currently no universal method of payment that is as easy as NFC has the potential to be. A recent report found that 74 million people in the US are already using their mobile for payments from online shops, with U.S. mobile shopping sales to reach $9 bn. This proves the growth of the market, but these figures currently relate to pure mobile payments. This perhaps point to a slight problem Google may have. If so many consumers are already comfortable to pay via their mobile online, with huge growth predicted, how are they going to prove the value of NFC, which essentially turns your phone into your wallet? Google will have to work hard on convincing us of the benefits, as opposed to the features.

Change payment as we know it

Quite how this will take off for Google depends very much on how they choose to implement the technology in our day to day lives, as opposed to purely investing in the NFC technology itself. Encouraging retailers to use NFC-equipped cash desks only goes some way to proving the value of this. It’s not really all that different to using your card, although it may be slightly different. But the huge potential in NFC mobile payments overall, is how they can be used to transform the shopping experience. If the payment is made via your mobile, then data can be used to target you with relevant offers that can be redeemed depending on your location. And this doesn’t necessarily need to look like a cash register at all. Imagine being targeted with an offer based on your location, that is only available for a very short amount of time, with the offer redeemable at a special pay point. In this way NFC can combine real-time with location services to change the way we purchase goods and services altogether. Mobile payment is going to shift massively this year, and you can expect a lot of announcements from manufacturers that will change commerce as we know it.

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