Why Mobile Carriers Will (Not) Partner with Google Wallet
By Anthony Belpaire, Jul 9, 2012
Note: This blog post was originally posted on MobilePayments Today.
Mobile service providers have a strong impact on device distribution. Remember you bought your latest smartphone at the Verizon or O2 store around the corner? Especially in markets where sales bundles – subscription plans combined with subsidized handsets – are a well-adopted commercial practice, service providers have a strong impact on which devices get distributed.
Of course, wallet providers such as Google or PayPal – who often have no large ‘off line’ sales network – seek to leverage this retail asset, either by having their wallets pre-deployed on mobile phones, or by service providers’ retail agents recommending the service to buyers of handsets and subscription plans.
The question is: what is the incentive for a mobile service provider to partner with companies such as Google?
It is all about leveraging the strength of both parties. The wallet provider brings in an ecosystem of advertisers injecting offers and coupons, while the mobile operator distributes the wallet to its domestic consumers. In exchange, the mobile service provider can ask for a fee per Google Wallet activation, or even better, propose a revenue share model.
But could this be a sustainable win-win?
A key priority for mobile service providers is customer churn reduction, or in other words, 'keeping the money.'
And here is the conflict: the stickiness of mobile wallets, used for highly personal services such as payments or saving loyalty points, might be much higher than the appeal of traditional voice or data plans that a mobile service provider can offer. This is especially true as we have not yet reached the stage of ‘wallet portability’ (i.e easily porting your stuff from a Google Wallet to an O2 Wallet, for instance)..
And that is a major concern to mobile service providers, who have already been subject to a shift in loyalty from operator brands towards device brands. Apple is a leading example in this regard; instead of consumers buying a mobile data plan and selecting a device, they go buy an iPhone and take the plan that goes with it. So promoting a Google Wallet inherently strengthens the loyalty to the Google brand and the related Android devices, and not per se to the mobile service provider.
Another concern for the mobile operator is that it might be completely phasing out its own understanding of consumers and retail customers. After all, Google Wallet is great at capturing info on what the consumer is effectively using his wallet for (which promotions were flipped, which virtual cards where requested to be provisioned in the wallet, etc).
Not to mention the fact that it is hard to believe that Google Wallet can exclusively bind itself to one carrier in a domestic market. There goes the differentiation aspect…
And last, but not least, operators will always have a consumer base with a variety of devices. So, if Google Wallet would be limited to Android (today, it only works with a limited number of Android devices), what about mobile customers who purchase non-Android devices? Can a mobile service provider afford not to commercialize value added services across its multi-device consumer base?
While partnering with Google Wallet could indeed accelerate mobile service providers’ advertising and payment ecosystem in the short term, they will have to manage the risk of becoming ‘dumb’ retail and distribution pipes.
It is crucial for mobile service providers to understand their customers. And mobile wallets are a perfect instrument to collect, but also leverage, customer profile knowledge. Instead of giving this valuable information away to Google, a better approach seems to be carriers launching their own wallets – strengthening their own brand and working across multiple devices.