JBS Group, Business Advisory Services

Wednesday, May 25, 2011

Google Introducing New Mobile Wallet for Android

Google is announcing tomorrow its new mobile phone wallet for the Nexus S NFC enabled phone. Google has paid for readers from Verifone to be installed in a number of merchant locations in New York City and San Francisco including Macy's, Subway and American Eagle Outfitters. Google has made agreements with Citi and MasterCard to handle the transactions. Only Google will have the key to the secure element in the NFC chip set.

This is exciting news for the few of us in the NFC  universe. But it is time for a reality check.

The Samsung/Google Nexus S phone has gotten some pretty bad reviews so far and is not selling well. One of the major complaints has been that the software in the Nexus S requires that you connect to Google's Cloud services for many essential operations. This is problematic for many people including me. Lest we forget, it must be a good phone first, then a good smartphone second. The NFC part is irrelevant for most users. So there are not many Nexus S phones in use in New York or San Francisco. How is Google going to provide for a real trial of NFC without a mass adoption of their NFC phone?

Maybe the mobile division engineers at Google believe the hype from Forrester researchers claiming that 40 - 50 million NFC enabled phones will be sold in 2011. For anyone who believes that figure I have a great piece of land in Siberia for a summer cottage.

Yes, RIM will probably come out with an NFC phone at the end of this year. But how many people will buy it immediately? Maybe Google engineers think that RIM will give them access to the secure element as well in Blackberry phones. Probably not. Whoever has the key to the secure element in an NFC chip set controls the wallet. This will always limit the adoption and usage of NFC phones.  If the NFC tag and secure element are in the SIM card then the mobile operator is going to control it. But NFC SIM cards and microSD cards are very problematic for numerous reasons as discussed in previous posts.

The turnover of mobile phones is about every 2 years in the US and Europe. Penetration of NFC enabled phones will take between 2-4 years for critical mass if there are at least 12 NFC phones available. By that time the Nexus S will be an antique. If companies keep creating unrealistic hype about NFC then it will lose all credibility by the time the technology is mature and ready for mass adoption and NFC chips could then become vintage as well.

As I have said so often, NFC as a transaction medium is coming and will do great things if rolled out properly without all the ridiculous hype and propaganda.

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