Google’s Decision to Ditch Its Card Adds to Search Giant’s List of Woes in Wallets

Google Inc.’s apparent decision to abandon its plan to launch a plastic card as part of its Google Wallet service is yet another sign of how major mobile-wallet players from outside the payments business are struggling to find a winning strategy, sources tell Digital Transactions News.

News of the development broke over the weekend and followed a string of setbacks for the search giant’s efforts to promote its mobile-payments system to merchants and banks. The most recent of these reversals was the confirmation from Google last week that Google Wallet head Osama Bedier had left the company.

Google had been widely expected to launch a traditional plastic card as a way of making it easier for consumers to use its wallet and for merchants to accept payments. Plans for the card leaked late last year, shortly after Bedier told a major payments conference that an entirely new version of Google Wallet, which he called Google Wallet 2.0, was imminent.

That version has yet to appear, and now the card plan has been scotched, according to “AllThingsD”, a technology publication from Dow Jones & Co. Inc., publisher of The Wall Street Journal, which cited unnamed sources. The decision to drop the card came from Google chief executive Larry Page, who was unimpressed by a “glitchy” demonstration of the card, according to “AllThingsD”’s sources. The publication added that plans are going forward to “update” the wallet’s rewards and loyalty program and to add more merchants. Announcements related to these plans are expected at the company’s big developer conference in San Francisco later this week.

A spokesperson for Google contacted by Digital Transactions News refused to comment on the “AllThingsD” report.

Experts who follow Google Wallet tell Digital Transactions News the decision to scuttle the card probably stemmed from a perception that the product was tied too narrowly to payments, not to the broader spectrum of consumer rewards the company is aiming to enable. “Just having a card for payment, there’s no magic there,” says George Peabody, an analyst at Glenbrook Partners, Menlo Park, Calif. “What do you do about the pre-sale and post-sale experience? The value is all in the pre-sale and post-sale experience.”

Indeed, others saw the card as a step backward for Google, even though a mag-striped card would have given Google widespread acceptance. “While everyone can understand the rush to get transaction volume, and ads, and merchant adoption jump-started, and issuing plastic cards would seem to be a natural expedient, the idea of deploying and promoting a digital-transaction system by pushing plastic was and is backward thinking,” says Steve Mott, a payments analyst and principal at BetterBuyDesign, Stamford, Conn., in an e-mail message. Mott adds there will likely be “other surprises” about Google Wallet announced at Google I/O, the developer conference slated to start on Wednesday.

Google Wallet has struggled since its September 2011 commercial rollout. While about 20 retailers agreed to accept the product and its rewards component, few have fully enabled SingleTap, the system that allows Wallet users to electronically redeem coupons and rewards at the point-of-sale terminal at the same time they make a payment. Many merchants, especially big-box chains, are wary of letting Google get too close to detailed sales data, observers say, a factor that may have driven some chains to participate in Merchant Customer Exchange (MCX), the retailer-controlled wallet project announced last year. “Google is all about access to data,” says Peabody.

At the same time, Google hasn’t been able to win support from a wide range of mobile carriers. The only major carrier supporting Google Wallet is Sprint. Three of the country’s largest mobile networks—AT&T Mobility, Verizon Wireless, and T-Mobile USA—formed a rival wallet venture called Isis, leaving them with little incentive to embrace Google Wallet. Indeed, Verizon has blocked the product on its phones.

Meanwhile, Google rival PayPal Inc. is apparently going ahead with its plans to offer a physical card tied to a PayPal wallet. That card, which PayPal expects will be accepted at 2 million locations within a few months, will rely on the Discover Network to reach merchants.