|ANALYSIS FROM KAREN WEBSTER|
|All Eyes On iZettle|
|Mobile And Payments: Two Peas In A Pod|
November 6, 2012
Given what everyone was grappling with last week with the aftermath of Hurricane Sandy, I’ll bet that no one even noticed that Groundhog Day in payments came on Friday, November 2.
Well, not THAT Groundhog Day when Mr. Punxsutawney Phil makes his big debut, but the movie version where Bill Murray wakes up and every day is the same day all over again. The reason that Friday was like that for payments is because some stuff leaked out about what Google is doing about its mobile payments strategy. And, while I am not one for commenting on rumors, there was enough here for me to comment about. So here goes.
It was revealed that Google’s mobile payments strategy is all about, well, plastic. It is reported that it will issue a card that allows consumers to access a digital account stored in the cloud linked to a bunch of other payment accounts. This will allow consumers to shop online and at physical stores with that one digital account. It is reported to save consumers time since they will be able to carry only one card around at all times. And that card is a black one that will enable broad acceptance because it will presumably ride the rails of an existing network and/or be co-branded with an issuer and will leverage existing merchant POS capabilities. So, bye-bye NFC (at least for now).
This card will also enable P2P transactions between Google accounts and will allow consumers to access their transaction histories online.
I know, sounds faintly familiar, doesn’t it?
On August 22, 2012, PayPal announced its big bold move to leverage its 130+ million PayPal accounts and its digital wallet by partnering with Discover. This partnership allows it to, in essence, become a fifth payment network and ride Discover’s rails and thereby gain acceptance at Discover’s 7-plus million merchants. It plans to issue a plastic card that would facilitate acceptance via a single card that consumers can use to access all of their linked payment methods. PayPal has enabled P2P ever since it launched some 14 years ago, and has, from day one, given consumers access to their payment transaction history on line. It has shunned NFC as an enabling technology in favor of a cloud-based solution at the physical points of sale, like “empty hands” that don’t require any card at all.
See what I mean? Groundhog Day!
Even without the sneak peek that surfaced on Friday and over the weekend, it wasn’t hard to see where Google was headed with its new wallet strategy. Osama Bedier, Google’s Wallet Guru, gave us his own sneak peek at that strategy as part of his day one keynote at Money 2020. In that keynote, he said that Google’s Wallet was about three things: saving consumers time and money, making the experience automatic and seamless, and creating ubiquity and reach. He stopped short of spilling the beans on how that was all going to happen, but you could read a lot into what was said and not said. You don’t have to have access to secret documents to know that his third point – ubiquity and reach – couldn’t possibly happen the NFC way anytime soon – so Google Wallet 3.0 has to live in the cloud and leverage something or someone’s existing infrastructure to enable the reach and ubiquity he talked about.
Bedier went on to say that payments is about layering and bridging solutions with a wallet being something that was available to consumers via any connected device. A plastic card is one way to build a bridge to ubiquity and access a digital wallet that lives in the cloud. Bedier also said that the name of the mobile payments game isn’t about payments at all but rather a bigger customer experience enabled by data; the implication that Google Wallet 3.0 is all about commerce of which payments is just a small and important but insignificant piece.
Hmm. Anyone else think that Google Wallet 3.0 sounds a lot like PayPal 2.0?
But there are some differences, and big ones. Some of these differences surfaced at the most fabulous digital wallets panel that I had the pleasure to moderate at Money 2020 following Bedier’s keynote. Bedier was among those on my panel, as was Don Kingsborough, the, ahem, King of PayPal’s POS strategy. Difference number one made for a spirited exchange between the two of them.
Bedier made the case that data drives a personalized commerce experience that is delivered via some sort of advertising/promotional offer. He said that the future of advertising is the future of retail. That makes a ton of sense if you are Google since (a) it is the biggest online advertising machine on the planet and (b) data is the food that feeds that beast. As Bedier pointed out, there is no one better in the world to gather and mash up and serve data in real time than Google. He’s right and its $14 billion in sales in the last quarter of 2012 alone just underscore that point.
Kingsborough agreed that a personalized experience is critical, but that is where the similarity ends. He described PayPal’s vision of the future of retail as one in which data drives a personalized experience that enhances the consumer and merchant relationship; one that emphasizes the value that having a PayPal digital wallet delivers for both. This value proposition is more like the “special treatment” that PayPal consumers get from merchants for being a PayPal account holder – like notices that their favorite designer shoe maker just shipped new styles and they are holding a pair of killer pumps in your size (fingers crossed that the PayPal team has this one built into its use case) or that PayPal account holders always get first dibs on notices that XYZ merchant is having its seasonal sale. The kind of stuff that makes consumers not just feel special, but that strengthens the bond between consumers and merchants and drives loyalty.
There are also a couple of other differences. PayPal has consumers that it can offer its plastic card to and those consumers today drive a ton of transaction volume via their PayPal accounts, online and via mobile. PayPal has estimated that it will drive $10 billion in volume via mobile – more than double what it did in 2011. Consumers who have adopted PayPal seem to be comfortable using it across channels today.
PayPal also never got distracted with chasing an NFC strategy – so spent the last several years focused on developing cloud-based solutions that leveraged its technology baseline. Its initial consumer value proposition was all about protecting transaction data and privacy so consumers would feel safe using it in unfamiliar places. That is what drove online adoption and seems to be helping it move into an omnichannel world where consumers are asked to transact a bit differently than they are used to doing.
PayPal has also made a ton of acquisitions that, when taken together, provide the foundation for enabling these cloud-based merchant/consumer experiences wrapped around payment. Its deal with Discover was designed to amp up its physical point of sale presence so that it could conquer the place where 90-plus percent of all transactions still take place.
Google is starting from not exactly ground zero, given its Google Checkout experiences, but pretty far back. As Bedier rightly pointed out in his talk at Money 2020, Google’s in the payments business today since it accepts payments as part of getting paid by businesses for advertising. But operating a retail payments business is a whole new ballgame entirely. It is a … repeat after me … a chicken and egg platform that has to have a compelling proposition for merchants and consumers – and at the same time. That is where I think Google has the heavy lift.
The black plastic card looks cool, but it has to persuade consumers who today have a zillion (okay, well on average four) other plastic cards to pluck from their leather wallets, not to mention PayPal’s and everyone else’s digital wallets to try at the physical point of sale. If Google thinks that the future of retail is about advertising, it means that they will want and need data to drive those offers to consumers. That will be data that merchants think belongs to them. Bedier made the point in his talk that Google respects and recognizes that transaction data is the merchant’s domain and will share it to “drive traffic” to merchants and “engage” consumers. It’s working very hard to emphasize its merchant-friendly posture. It has to since that is where Google Checkout got all goofed up – merchants said “thanks-but-no-thanks” to some pretty rich deals that included advertising dollars and no transaction fees. On the data side, it’s also hard to know if consumers will feel weird about the notion of Google having access to their data. I asked Bedier that on the panel, and he didn’t think it would be an issue. I’m not sure. Consumers are increasingly aware of how fast and loose the internet can be with their data and payment stuff is among the holiest of data. Convincing consumers that having a Google wallet isn’t a back door to having access to their data will take some convincing, I think.
My take on all of this is that Google and PayPal may have similar sounding digital wallet strategies now but it’s the execution of those strategies that will drive consumer and merchant preference. And, that’s the name of the digital wallet game.
When it comes to digital wallets, there may be multiple digital wallets in the market, but consumers will chose and use just one. I mean, really, have you ever tried to toggle back and forth between multiple physical wallets? It’s a pain and as much as I may love the look and feel (and smell!) of my collection of cool leather wallets, I “standardize” on the one that allows me to carry the stuff I want and need to use. The digital wallet experience will be no different.
PayPal and Google want to be THE one. (So do a few hundred others, including MasterCard and Visa.) When it comes to the digital wallet world, PayPal has a 14-year and 130-plus million customer head start, and according to its executives, key merchant executions (and interest) that will bring its value proposition to life in the next few weeks and months.
PayPal, though, is not without its own challenges. It may have existing account holders to give cards to and to enable other physical point of sale checkout but it still has to deliver a value proposition that will give consumers a reason to use it at the store — and to acquire even more accountholders than it has today. And, it will need to figure out how to make changing between payment methods less clunky at the physical point of sale. I have to presume that they are working on that now (but please don’t think that letting consumers change after the transaction is the answer – hybrid cards that have offered that solution haven’t gone far since it sounds good in theory but is not consumer-friendly). And, neither PayPal nor Google can rest on the ubiquity laurels that riding other’s network rails may offer them – at the end of the day, if ubiquity is the big differentiator, then its game over for everyone but Visa and MasterCard.
So, the game-changer and game-winner will be about value proposition for consumers and merchants and who can deliver one that both think really matters. We know where the lines are drawn in the sand in Silicon Valley now. Let’s see what happens next.