I happen to have studied payments systems during my past academic explorations. Also most importantly I have witnessed the exponential growth of MPESA; a Kenyan payment system based on SMS which has a turnover of just about a third of Kenya’s GDP. At the same time credit card and debit card proliferation and tie-ups in Kenya have miserably failed.

These are thus my two cents of wisdom on Google Wallet. As there may be no such thing as a bad idea, Google Wallet should be given all due credit and an opportunity to prove itself, nonetheless some design and structural decisions taken by Google raise a few questions and put doubt into the stance that this might just be the technology that will revolutionise payments.
Below are some of the considerations I would question: -

1. Wrong partnership. Mastercard is old school, they operate in a cartel and deliberately do not innovate or restrict innovation to maintain their status quo

2. Platform bias. PayPal, MPESA, Visa and Mastercard have been successful because their platforms have decent levels of agnosticism. Google Wallet is set to operate on a particular variant of the Nexus, locking out many users

3. NFC is not the best interface for large-scale payment systems. Google should ask Nokia about its failures with NFC. There is an added cost for merchants to integrate NFC into their systems and for users to purchase NFC fitted handsets. MPESA and PayPal interfaced with standardised and mainstream technology. SMS for the latter and IP for the former. There were no significant added costs for both consumers and merchants. Google probably is hoping for an ‘iPhone’ moment but payments work differently. Adoption of a platform is dictated by willingness of merchants to invest into the new platform and the propensity of consumers as well to use such platforms

4. Lack of wider industry support. Yes this a big hurdle for any technical player but worth the wait. That is the reason why IP,GSM and related standards are successful. If operators, vendors and industry players agree on a unified standard, the whole industry benefits. Walled gardens only work for certain verticals and not payments as stakeholders are more in number and also wield significant influence because at certain levels policy makers, regulators and government agencies need to be involved

5. Distributorship Model? At face value why would financial or ‘soft’ services require distributors? Well it depends on the dynamics of the particular application and or industry. However with financial services, distributorship is important to bridge the gap between parallel systems and to lubricate the flow of money from one system to another. Also across this vertical distributors and end users may have dual roles like PayPal merchants. Anyway the reason why M-PESA worked well in Kenya is its network of agents traversing the whole country. M-PESA has an open business model that allows credible existent and new firms to offer services on behalf of the service provider, thus solving the last mile problem, furthermore returns are pegged on performance giving the agents an incentive to perform well. With Google Wallet it is not clear how the distributorship model will scale from mid sized businesses to large firms. Basically who and how will people use Google Wallet? Smart idea on paper but will it scale down to the villages in Africa and up to the 7-Eleven store in down town New York?

6. Inefficiency! Well from what I read, the system will have an intermediary interface via the Google Debit Card or the Citi Master Card, which will bridge Google Wallet to the incumbent financial system i.e. the run of the mill credit card and the likes. I do not know what the cost structures look like but why on earth would someone sign up for an extra banking or financial service so that they can use Google Wallet. Not only does this add up to negative user experience but puts in another layer of administration and costs. This adds another problem instead of providing a solution.

What inherently make payment systems useful and functional are their rates of adoption and the maintenance of a critical mass of users. What makes them profitable on the hand is the velocity of transactions and movement of money across the ecosystems. Payment and transfer systems make their money out of transaction commissions. With the direction Google Wallet is taking, it is clear it will not take us to the promised land of ‘transaction ease nirvana’. What will take us to the promised land are the innovations, processes and start-ups that defy the status quo and create simplistic technology based on everyday processes and devices. Consumers do not want additional processes and accounts to actively manage, they need an easy, intuitive, simple and secure method to transact.


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My Two Cents on Google Wallet



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