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.

Mainstream Media Jumps Onto the NFC Hype Wagon

I love this headline from Britain's Daily Mail:

"End of the credit card? With one swipe of an iPhone you'll be able to pay for your shopping"
(There is the rumor that the iPhone 5 will have NFC. That may be true, but that was also the rumor about the iPhone 4. Whether it is true or not does not seem to matter to this writer.)

Or from CNN:

"You can already use your iPhone, Droid or BlackBerry to buy a hotdog at the ballgame, buy your Starbucks latté, or give a friend a few bucks by bumping phones. But by the end of the year you may not even think twice about reaching for your phone to pay at the register instead of fumbling for your credit card."

My goodness. You would think that NFC was already in all the phones and POS terminals and that we are weeks away from paying at the POS with NFC enabled phones. I also enjoy the American writers that claim that all of this fantastic technology is already being used here in Europe on a daily basis. I can tell you, as a European resident, it is not. Most Europeans are as clueless about contactless or NFC as are most Americans. What we do see here are Mifare cards for mass transit. There are only 2 phones available that have NFC. One is the new Google Nexus S and the other is a Nokia that is not very popular. And the NFC chip in the Nokia is not capable of working with NFC payment terminals yet.

It is very exciting to see the mobile operators and banks pushing this hype into the media. It means that they are serious about their commitment to mobile NFC payment. It is coming and it will change the way many people conduct transactions. But as I so often write, it is very important for those in the industry and investors interested in this industry to be discerning about hype vs reality.

But the dumbest comment I have read so far is this one:

"Ewan over at Mobile Industry Review says that “once Apple integrates NFC into their devices, it will be game over for every other provider in the marketplace.” He points out that it doesn’t matter if there are a good few billion people in the world who will never be able to afford an iPhone — they are outside the United States."

I do not need to repeat again my view of mobile payment reality. But I would like to add this footnote that came from a response I sent to someone just the other day.

There are a lot of companies jumping into this space.  There is a lot of money out there. There are a lot of potential customers and users out there. It is a big world. No one, two or even 50 companies are going to swallow the whole market. No one technology is going to be, ‘The One’. This is not The Highlander. There will be many winners in this market. There are golden opportunities for different technologies, different markets and different countries. Smart entrepreneurs and investors will have many opportunities to profit.

I recommend this as well:
http://www.pymnts.com/will-apple-get-us-to-wave-at-the-point-of-sale/?l&goback=%2Egmp_116917%2Egde_116917_member_41730939

Do I Really Want My Wallet In My Phone?

For as long as there have been mobile phones the mobile phone manufacturers and the mobile phone service providers, operators, have been seeking ways to increase their revenues. First it was voice, then it was SMS, then it was ringtones, then WAP and now it is data. But what would be next? Financial transactions. The dream revenue stream. Billions of transactions conducted with mobile handsets and the mobile operators taking a little piece of every one of those transactions. Wow. No longer limited to petty fees for voice, SMS and data. The handset manufacturers drooling at the prospect of selling hundreds of millions of new mobile handsets to everyone who now felt the compelling need to be able to have their wallet in their phone.

So the PR campaign began. Subtle messaging describing the convenience of having your wallet in your phone. Why carry a physical wallet, an mp3 player and your phone? How uncomfortable and inconvenient. Why not carry all of that in one smart and cool device? Little by little the push gained steam in the tech world, investment universe and the media until no one could imagine that normal people might not want their wallets in their phones. The hew and cry was heard, “I want everything in one little device”. “I only want to carry one device, my phone”.

But the question is, does everyone feel this way? Do people really want their wallet electronically in their phone? Do some people want their wallet electronically in a different device? Do some people want their wallet in their wallet?

Obviously the PR campaign will now intensify with the introduction of the Google/Samsung Android NFC enabled phone. Over the course of the next 12 months a number of new handsets with NFC will appear in the European and North American markets. Mobile operators will finally attempt to work out their differences with the card issuing banks, credit card organizations and merchants. Visa, MasterCard, First Data and a few others will introduce their feeble attempts at making existing handsets into wallets with microSD cards, shells and stickers.

But the real test will be with the public.

Will the normal person on the street want their wallet in their phone? Will they purchase a new phone to be able to do this? Are criminals just drooling over the prospect of millions of insecure phone-wallets proliferated all over the place?

The answers are this.

No, the normal person on the street doesn’t care about this at all. Many will be convinced by good advertising and a mobile operator sales person that this is going to change their lives so they will buy the new phone. Criminals are already preparing programs to hack wallet-phones and steal PIN codes. PIN code hacking programs are inexpensive and easily available for laptops so they will be quite easy to port to phones. And the payoff will be great.

Slowly but surely people will use electronic wallet-devices and within ten years they will be commonplace. But not everyone wants their wallet in their mobile phone no matter what the vested interests and their PR merchants push. Some people will want their electronic wallet in a portable multimedia player, some in a little keyfob, some in their watch and some in a dedicated little wallet device. Of course the majority of people will still want their wallet in their wallet. Certain merchants, banks and venues will want to issue their own branded electronic wallet-ticket devices. Added services, convenience and security are key to acceptance. As soon as electronic wallet-phones with PIN codes are hacked en mass there will be attempts made to secure the existing NFC handsets with optical biometrics using the phone’s camera and other exotic security methods. Some mobile operators will demand fingerprint sensors now be installed on every new electronic wallet-phone by the handset manufacturers.

The future is golden for electronic transactions. But the future is a great deal more diverse than the mobile phone handset manufacturers and mobile operators would have you believe.