Google is digging for mobile gold with a series of enhancements for Google Wallet that put the mobile payments solution into more direct competition with PayPal and Apple, but do not address its limited availability.

The news about Google Wallet comes out of last week’s annual conference for Google software developers and includes enabling person-to-person payments via email, the ability to store loyalty cards and coupons as well as a streamlined mobile checkout process. With Google Wallet struggling to gain traction with consumers and retailers, the search giant hopes these advances can help drive some excitement around its mobile payments play.

“Google setting up easy to use email person-to-person payments is a direct challenge to PayPal’s dominance of the P2P space, because Gmail is so widely used,” said Mary Monahan, executive vice president and research director for mobile at Javelin Strategy & Research, Pleasanton, CA. “This is the first we’ve seen of Google getting into the direct person-to-person space like this.

“The new [Objects] API makes it easy for businesses to add loyalty and offers to Google Wallet, which opens the wallet up tremendously,” she said. “However, it is still important to realize that Google wallet requires an NFC-enabled Android device, which is only available on select carriers.”

Enhancing the digital wallet
Person-to-person payments are a key area of mobile payments, enabling one user to easily send money to another.

By integrating Google Wallet with Gmail, users can send money to friends in the United States directly from their Gmail inbox by tapping on the $ icon in attachment options. Users can send money for free from their Google Wallet balance or directly from a bank account.

For a 2.9 percent per transaction fee, users can also pay with a credit or debit card.

The new feature will be rolling out over the next few months.

Google Wallet Objects is similar to Apple’s Passbook in that it enables developers to integrate their loyalty programs and offers into Google Wallet, with users then able to save these items directly to their Google Wallet for easy access.

Using Google’s location services, consumers also get timely notifications about their saved offers.

Google is also offering developers to upgrade and tie into the program with Google Offers, enabling developers to distribute offers across Google properties, including Adwords, the Google Display Network and Google Maps for Mobile.

Merchants that have already started integrating with the Wallet Objects API include Alaska Airlines, The Body Shop, BJs Restaurants, Raley’s and Marriott Rewards.

Non-payments
Several partners such as Vibes, Loyalty Lab and Urban Airship are also working with Google to make it easy for marketers to integrate their loyalty programs and offers into Google Wallet.

“Up until now, Google Wallet was primarily focused on mobile payments,” said John Haro, chief technology officer at Vibes, Chicago. “Google’s announcement about Wallet Objects APIs for offers and loyalty cards represents the first real expansion for Google into the non-payment areas of the digital wallet.

“The new technology aims to solve consumer convenience problems of managing paper coupons and loyalty cards in a way similar – at least on the surface – to Apple’s Passbook,” he said.

“Unlike Apple, Google has provided more tools such as APIs for developers to directly integrate Google Wallet. These tools also give retailers and brands more flexibility in the look, feel and behavior of Google Objects.”

The right direction
With 97 percent of mobile shoppers abandoning their shopping cards before a purchase is made, Google has also introduced the Instant Buy API to eliminate some of the frustrations of making purchases in native Android apps.

For users who have set up Google Wallet, they can now checkout in Android apps in as few as two clicks without having to manually enter their billing or shipping information. The launch partners for this initiative include Expedia, Priceline, Rue La La and Tabbedout.

All three enhancements are important steps in the right direction for Google Wallet. However, it is not clear yet how much of an impact they will have on driving further adoption for Google Wallet.

“The issue is that Verizon, AT&T and T-Mobile have a competing wallet – the ISIS wallet,” Ms. Monahan said. “The nation’s largest network, Verizon, for example, continues to block Google wallet on its phones.

“Yes, [these enhancements] will make it more attractive,” she said. “But not attractive enough to overcome the mobile network problem.

“Google needs to be able to roll the wallet out across the U.S.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York