Sprint’s Galaxy Nexus: Can a Second Google Wallet Phone Ignite Mobile Payments?

The Samsung Nexus S smartphone running the Google Wallet payments app. Photo: Jon Snyder/Wired

When Sprint announced that the Samsung Galaxy Nexus would be its first 4G LTE phone, hitting stores on April 22 for $200 on a two-year plan, much of the focus was on its price — $100 less than Verizon’s version of the Nexus.
But the real news was Google’s value-add: a $50 Google Wallet credit for each handset sold.

‬”Google Wallet is on a limited number of phones, and the infrastructure isn’t built out in many stores yet. But a $50 credit is something consumers in the Sprint network will notice.” — Avivah Litan‪

Wallet, of course, is Google’s mobile payments platform that hooks directly into the Near Field Communication (NFC) chips being deployed in many smartphones. In theory, you could load your Google Wallet with cash, and use it to buy small retail items with a wave of your phone over a simple scanner at check-out.
And so the new Galaxy Nexus announcement is loaded with nuance: What might look like a simple sales promo on the surface belies Google’s greater vision — if not also its struggle to turn the Google Wallet payment platform into a credit-card killer.
So far, Wallet hasn’t lived up to the standards of success Google has seen with products such as the Chrome web browser, Gmail and the Android operating system itself. Many smartphone owners don’t even think of Wallet as a payment option because, so far, it’s only available on one other phone: the Samsung Nexus S, which was released in 2010.
“Right now, not a lot of consumers are using Google Wallet to walk into stores and tap their phone to pay for something,” Avivah Litan, a Gartner analyst, told Wired. “Google Wallet is on a limited number of phones, and the infrastructure isn’t built out in many stores yet. But a $50 credit is something consumers in the Sprint network will notice.”

Verizon’s version of the Galaxy Nexus contains the same NFC chip that Sprint’s version has. But Verizon disabled the phone’s NFC chip and thus the “wave-and-pay” Google Wallet feature can’t be used. In fact, of the four major wireless carriers in the U.S., only Sprint supports the Google Wallet platform.
Though Google Wallet’s NFC features have failed to catch on, Google does have a potential user base thanks to the merging of its online payments system, formerly known as Google Checkout, into Google Wallet. In fact, every Android user who purchases apps, music, movies or books from the Google Play store does so using Google Wallet.
Nathan Tyler, a Google spokesman, declined to say just how many Android owners are currently using Wallet as an NFC paying option (as opposed to using it only as a media-purchasing vehicle). But Tyler did say that Sprint has committed to releasing 10 Wallet-compatible phones before the end of the year.
“We’re very excited about the release of new NFC devices that support Google Wallet because we believe that it will create the opportunity for more people to access what we believe is the future of mobile payments,” Tyler told Wired. “We’re still in the very early days of building out the NFC ecosystem.”
In order to build out that ecosystem with any degree of success, Google will need millions of phones running Wallet — and not just on Sprint, but also its three major rivals. It will also need to convince retailers and consumers that using Wallet is better than whipping out a credit card, or using competing platforms such as Square, PayPal or Isis (a rival NFC payment system founded by AT&T, Verizon and T-Mobile), said Richard Oglesby, a payments industry analyst at the Aite Group.
“Google Wallet can either show up on AT&T, Verizon and T-Mobile by cutting a deal with those carries, or they can bypass the carriers by storing all that information in the cloud and coming up with a version of Google Wallet that doesn’t rely on the secure, NFC hardware to complete a transaction,” Oglesby told Wired. “PayPal and Square are already doing mobile payments with everything stored in the cloud, and neither are reliant on NFC chips in phones.”
Gartner’s Litan said she doesn’t see a cloud-based mobile payment alternative as an option. “NFC has to be tightly coupled with the hardware on a phone because it has to be secure,” she said. “Cloud-based options are too reliant on too many variables, from security concerns to something as simple as being able to get a signal on your phone in a shopping mall.”
While Google Wallet can’t yet be considered popular, compatible NFC readers are set-up and waiting in more than 100,000 retail locations, including big-name stores such as Banana Republic and Walgreens. Android is also activated on more than 850,000 phones and tablets worldwide every day, and more than 300 million Android phone have been activated since the operating system launched in 2008.
“It’s easy to count Google Wallet out right now because only Sprint is on board,” Litan said. “Verizon, AT&T and T-Mobile are all invested in Isis, and they’re very protective over mobile payments because the future what this will look like is still undecided. But Isis hasn’t gone anywhere yet, and Google Wallet is something that’s here and working right now.”

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