Google’s relationship with the big U.S. wireless carriers is complicated.
Now that Apple’s a major player in mobile payments, everyone else is scrambling to play catch-up.
In the past week, Samsung acquired digital wallet LoopPay to power payment transactions on its smartphones, and on Monday, Verizon, AT&T, and T-Mobile agreed to preload Google’s mobile payments system on their phones, while also selling it some technology and intellectual property from their joint mobile wallet venture, Softcard.
Google’s relationship with the big US wireless carriers is complicated. It had a head start in the mobile payments game, debuting Google Wallet in 2011, when it was more or less the only player in town. But the wireless carriers—fearing the search giant would control the space—effectively smothered Google Wallet by blocking the app on their devices.
To be fair, other factors, such as a lack of store support, also played a role. By the end of 2012, although 41% of American consumers were aware of Google Wallet, only 8% had ever used it, according to a 2013 comScore report.
Now that Google finally has the blessing of the wireless carriers, it’s back to square one for Google Wallet. Armed with the Softcard IP, Google is gearing up to reboot Wallet to compete against Apple Pay and its ilk.
Even with the mobile carriers on board, Google Wallet faces challenges. A number of retailers, including CVS and Rite Aid, have put their weight behind CurrentC, a mobile payments solution from the Merchant Customer Exchange consortium, further fragmenting a space, which at $3.5 billion in transactions, is still tiny.
And getting customers to alter existing habits is tough. The fact is, the overwhelming majority of consumers who have tried paying for stuff with their phones found it more cumbersome than paying with a traditional credit card.
“To get a customer to change the card they use, you have to often incentivize them or force them,” Forrester analyst Sucharita Mulpuru-Kodali tells Quartz. The latter could result in consumer backlash, and the former proved unsuccessful for Google when it tried luring early Wallet users with a $10 credit.
Though the mobile payments space is heating up, payment-by-phone is still far from mainstream. “Mobile payments is such a minor part of the payments world now that it’s a bit of a joke to say there’s any winner though that hasn’t stopped Apple from trying,” says Mulpuru-Kodali. “It’s like saying you’re the market leader in hovercrafts.”