Why Google Wallet Will Own the Mobile Payment Space
Almost four months after Google (Nasdaq: GOOG) first revealed its new mobile payments application, Google Wallet, the app is finally rolling out to the masses this week.
In case you missed our previous breakdown of its technology, here’s a quick recap:
You simply download the app onto your smartphone and create a PIN code to make purchases – just like you would for a debit card. Once everything’s approved, you simply tap the phone to a MasterCard (NYSE: MA) PayPass terminal and presto! You’re good to go.
So if you have an Android smartphone with a Near Field Communication (NFC) chip built in, you can start tapping to pay sometime this week.
Unfortunately, only a few smartphones – including the Samsung (SEO: 005930) Nexus S and Nexus S 4G – currently have the revolutionary chip built in.
That’s why competitor services like PayPal, Square and the ISIS platform from Verizon (NYSE: VZ), AT&T (NYSE: T) and T-Mobile are hoping to swoop in and corner the mobile payment market. And many experts are predicting that they could do just that.
But they’re dead wrong!
I’m not convinced that any of these services can compare to what the Google Wallet platform has to offer. And here are three reasons why:
~ Reason #1: Credit card partners are piling in.
Initially, Google Wallet’s only credit card partner was MasterCard, meaning users from other card companies would need to load up a pre-paid card within the app to use the service.
But on Monday, Google announced that it has teamed up with Visa. Better yet, Discover and American Express are joining the party soon, as well.
~ Reason #2: Google security is second to none.
Not all Google Wallet competitors are using NFC to conduct transactions. And that’s a huge mistake… because Google’s NFC chip, made by NXP Semiconductors (Nasdaq: NXPI), adds an extra level of security to your transactions.
Basically, the chip is isolated from the rest of the phone’s hardware and operating system. That means only Google-approved software can access it. Also, the communication between the chip and the bank is encrypted three times over, making it just about as secure as an ATM machine.
~ Reason #3: More NFC-enabled phones are on the way.
Very soon, the lack of NFC smartphone options won’t be an issue. Consider: If Google’s recent bid to purchase Motorola (NYSE: MMI) gets approved, it can make sure NFC is installed in all upcoming Motorola Droids.
Plus, NFC Rumors reports that T-Mobile is gearing up to release five new NFC-enabled smartphones by the end of the year. Microsoft(Nasdaq: MSFT) and Sony (NYSE: SNE) have followed Google’s lead and partnered up with NXP Semiconductors to get NFC chips into future devices. And other NFC enabled smartphones from LG (NYSE: LPL), Acer (TPE: 2353),Nokia (NYSE: NOK) and Research in Motion(Nasdaq: RIMM) are also in the works.
So as NFC infrastructure improves, and more people realize its capabilities, I’m convinced that Google Wallet’s superior platform and security benefits should ensure its domination in the mobile payment space.
Good investing,
Justin Fritz
Related Topics: Stocks, Tech and Innovation
I like the fact that Google is opening up its virtual wallet to all major credit card brands, so that we can use for payment the card of our choice. American Express, in contrast, is doing precisely the opposite with its PayPal-like Serve. http://blog.unibulmerchantservices.com/google-wallet-goes-live-more-consumer-friendly-version-to-follow
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We (Americans) are actually quite far behind on this technology. If you look at even developing countries in Africa/southeast Asia etc, they are already using this. Safaricom is based out of Nairobi and has been giving consumers this capability for over 3 years now…This sort of technology became a necessity since banks were and still are reluctant to issue credit cards or even checking accounts to many citizens in these countries. Most people keep all of their savings on their phone (which can be used as cash or credit for text/calls). Through NFP technology they can then pay merchants with a simple text (prob not with the security capabilities of goog though).
On another note: NXPI is a great buyout opp for Goog or Apple right now…imo
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