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Google Wallet makes risky move by removing gift, loyalty card support

Google recently sent out an email to Google Wallet users informing them that the service will be removing gift and loyalty cards from the mobile application on Aug. 21. This move may be harmful for the slow consumer adoption of Google Wallet.

Google Wallet has been struggling to catch on in the mobile payments world in general, and this update may put the product even further behind. Other companies such as Starbucks and Jamba Juice seem to be having much success with mobile gift card and loyalty support, especially since they rely on mobile bar codes as opposed to NFC technology.

“NFC payments are not working yet in the U.S,” said Greg Smith, analyst at Sterne Agee, Birmingham, AL. “Why? The only widely available NFC payment scheme has been the Google Wallet, and it has actually not been very widely available because there have only been a couple of phones that support it.

“There is a decent amount of NFC-enabled terminals at retailers, but relatively few consumers carry a phone that works with the Google Wallet,” he said. “It will clearly be interesting to watch Isis’ recently announced national rollout.

“And all eyes will be on Apple once again as they unveil then next iteration of their iPhone to see if it will have NFC support.”

Mobile gift and loyalty support
In the email, Google explained that the company is looking into other options for gift and loyalty card redemption within Google Wallet, but for the time being gift and loyalty cards will only work as physical cards.

According to Drew Sievers, founder/CEO of mFoundry, Larkspur, CA, Google Wallet may have had trouble with its gift and loyalty cards because it was through NFC.

“Bar code-enabled gift and loyalty solutions are doing very well because there is less friction in the model,” Mr. Sievers said. “With NFC, you need to have a perfect storm of NFC phone adoption by a consumer with a loyalty program at a merchant supporting Google Wallet.

“That’s a steep order,” he said. “Bar codes, on the other hand, work on pretty much any phone with existing systems at many merchants. That means less friction, lower cost, and greater adoption.”

For example, Starbucks has had much success with its mobile payment app that uses mobile bar codes to scan payments and offers.

In the third-quarter 2013, Starbucks saw more than 30 percent year-over-year growth in total dollars spent in-store from My Starbucks Rewards in the U.S. (see story).

Driving mobile wallets
With the number of competitors fighting to lead in mobile commerce, gift and loyalty support might just be the winning feature.

A recent Yankee Group report showed that while 68 percent of consumers were interested in adopting mobile payments, only 14 percent had actually used it in the past three months. The report concluded that mcommerce systems needed to provide mobile offers to consumers in order to lure them in (see story).

According to Sterne Agee’s Mr. Smith, loyalty and gift card support may have the ability to make a mobile payment system more attractive than a credit card.

“Mobile payments are still waiting for the killer app,” Mr. Smith said. “Loyalty has proven to be a killer app with Starbucks, so it is logical to assume that loyalty will be critical to broadening mobile payments.

“Since paying with a phone is not necessarily faster or more convenient than paying with a card, there needs to be a compelling reason for a consumer to want to pay with their phone,” he said.

“Loyalty, rewards, offers, coupons and discounts are likely to be the key to driving mobile payment adoption, in my opinion.”

Final Take
Rebecca Borison is editorial assistant on Mobile Commerce Daily, New York