Last week, Google launched their contactless payment system, Google Wallet. They are initially trialling it in two US cities, New York and San Francisco. Besides a simple touch to pay wallet, it will also include the facility to hold and redeem vouchers on the phone. There has been a mixed reaction to Google’s Wallet though. Here is a run-down of the good and bad points about their NFC offering:

What’s right with it

1. Google has the traction to make NFC payments happen. Whilst there are many companies in the mCommerce space, it takes a Google (well, Google) to get it into the mainstream. Given the number of providers getting into the sector, Google will help consolidate the market.
2. Low cost of transaction. From a merchant perspective this could be the killer app. Google are not interested in making money from this but rather, using it to develop their search marketing base. They are therefore only charging the standard card-holder present fee. Compare that to the transaction costs of Premium SMS (35% or more), and Google Wallet become a bit of a no brainer. What’s more, for launch they are giving away the terminals and $100 worth of free transactions.
3. Vouchering and discounts. Wallet ties in very neatly to Google Offers. In fact there are some that believe that Offers isn’t about beating Groupon, but rather connecting it to NFC. The idea is that Google Wallet users will receive offers that can be redeemed by touching in to a contactless terminal. As one commentator put it, it will ‘close the loop’ in the offers/payment system for merchants, and reduces the effort of having to print out or show vouchers for customers (http://searchenginewatch.com/article/2075862/Google-Offers-and-Payments-Its-all-about-Search).
4. It goes well beyond payments and vouchers. Google wallet isn’t just a payment card, or an offers network. It will also be a ticketing mechanism, travel card and could even replace your house keys and let you into your home. Worried about losing your phone (and ergo your wallet and your house keys)? Google point out that people take more care of their phone than their keys or wallet. We know where our phone is most of the time, but do we know where the other items are? And the advantage of it being held electronically is that you can both quicky ‘cancel’ your keys and get a replacement. Much cheaper than a locksmith.

What’s wrong with it

1. Getting sued by PayPal. OK, tech companies are always getting litigious with each other (just look at Apple and Samsung), but the legal threat from such a major payment competitor will make roll-out more complicated (http://www.webpronews.com/paypal-sues-google-2011-05).
2. Lack of terminals. Obviously for NFC to work, there needs to be enough terminals in retail outlets. Google are intending to use Mastercard’s  PayPass as the reader. There are already 120,000 of the devices in the US – that sounds good, but in terms of retail coverage that’s a pretty tiny percentage of outlets. Some commentators believe that terminals will need to become ubiquitous to achieve mass adoption.
3. Fragmentation. The market is already becoming divided. First off there is the operating vs operating system wars. RIM have already launched an NFC handset in the states, Orange and Barclaycard in the UK. And everyone knows that Apple is developing their offering in that space. Outside NFC, Square is making great gains and recently launched their CardCase which allows users to easily make payments through their phones. It is far from a given that Google will own the contactless space .
4. Issues with Privacy. As one commentator said, it will be the end of anonymous shopping. That isn’t simply about being able to hide embarrassing purchases. It will be about freedom from being followed round by advertising. Google’s revenue model is all about advertising, so the primary reason for getting into NFC is to use the data to further ad revenue, particularly behavioural targeting. Google will know everything about your purchasing habits both on and off line.
5. Concerns over security. It’s the question almost everyone asks when first told about NFC. What about security? Google have certainly addressed the issue by keeping the credentials separate to the OS along with a robust encryption.
   That’s still doesn’t detract from user concerns. Most people wonder if it’s possible to snatch a payment just by walking past someone. The answer is of course ‘no’. Both the proximity (4cm) and the encryption makes that hard (Google would say impossible). However there are some industry experts who also think that many hackers will try to compromise the system (http://www.eweek.com/c/a/Security/Google-Wallet-Security-Solid-Until-its-Hacked-566798/). After all, Android was hacked just a few months ago.
6. Developer unfriendly. Fair enough, it’s a mobile wallet so you can’t exactly open up the data to everyone and their dog. However, that also means that Google is looking to succeed without the support of a developer community (http://www.i-programmer.info/news/81-web-general/2519-google-wallet-developer-unfriendly.html). That will make the whole thing much harder to realise. Surely there must be some kind of API that allows developers to interact with the wallet but raise security problems?