Is Google Wallet over before it began?

google wallet doomedGoogle Wallet has found itself stuck between a rock and hard place: it knows NFC payments are the future yet few of the necessary parties are willing to take the plunge with its product. And earlier this week, former co-founding engineer (who had since stepped down but remained at Google) Rob von Behren revealed via LinkedIn that he has left the company for Square. It’s only the most recent blow for a platform that has faced noticeable setbacks since its launch in September 2011.

Von Behren commented on the move, telling NFC Times, “When I left the Google Wallet project in January, I fully expected to stop working in payments but to remain at Google. After meeting the team at Square, however, I decided to do just the opposite. Square is doing some great things in the payment space. They have a strong leadership team and a culture that fosters innovation.”

He isn’t the first to defect. Just last month, co-founding engineer Johnathan Wall and product lead Marc Freed-Finnegan left to begin their own startup, Tappmo. While little is known about the company, it’s safe to say it will be a competitor of sorts, describing itself as both the “next generation commerce network” and “fuel for the mobile shopping revolution.”

I got in touch with Freed-Finnegan and Wall, who aren’t sharing details about Tappmo just yet but did say via email they “think it’s an extraordinarily exciting time for mobile commerce and payments.”

“Phones have the potential to revolutionize the way people shop and greatly enrich the relationships that merchants have with consumers — with tremendous benefit to end users. With Tappmo, we hope to build upon our market context with a unique technical approach to these opportunities and challenges. We believe that in short order, everyone will find products, connect with merchants, and complete transactions online and offline with their mobile phones.”

It all doesn’t paint a very inspiring picture of Google Wallet, which seemed on top of the NFC payment game when whispers about the project first began. So what’s going wrong?

According to NFC expert Andreas Schaller, nothing – at least not on Google’s part. “The ‘issues’ are based on general RF [radio frequency] challenges like the ‘man in the middle’ approach for listing into the transmitted data or the fragmented smart card business in general,” he says. “Looking from a business perspective, Google wants to earn money, as does Visa, as do the retailers.” He explains that unless the customer wants to pay more – which can be assumed is definitely not the case – somebody in the supply chain will have to earn less or people will have to buy more.

Co-founder and CTO of Revel Systems, Chris Ciabarra says the NFC payment system holdup can be attributed to “greed, costs, and behavior.”

“The fact that everyone wants to control this technology is one of the holdups. It’s a battle between credit card companies, technology companies, and brands,” he tells me.

One of those competing technologies is, of course, iPad point of sale solutions – like Revel, Square, PayPal Here, or even rewards system Belly. These types of clients have had considerably more success and faster growth than NFC payment applications. “The payment system is the 100-year-old duckling that no one wanted to touch; it’s like taking on the world,” says Ciabarra. “The technology everyone is using is outdated, hard to support, and it’s even harder to connect third parties into a closed architecture.”

While Revel serves the same purpose as Square, it’s taking a different approach. “Companies like Revel are coming at the market with open arms, allowing multi-payment vendors to connect into it and to profit off the open cloud payment system.”

There are obviously more tangible tangles when technology tries to disrupt an institution. “Installing NFC equipment can cost hundreds of dollars per register for retailers, says Ciabarra. “And consumers haven’t modified their behavior to wave a card or phone in front of a point-of-sale system.” He says that unless buyer behavior takes a fast and hard turn, NFC payment adoption is dead in the water and will be bested by virtual apps that are already solving payment problems. “NFC had its chance and is – in my book – already an outdated technology for payments.”

The fact that Google Wallet is still only available with the Sprint Nexus S 4G isn’t helping matters. President of Twistee Treat, a Revel customer, Corey Balzer explains: “Google Wallet for payment does not work with all phones and is limited to just phones with NFC [capability]. Note iPhone is not of them.” He says he needed a solution that was open, not closed, and mentions his company is considering using LevelUp, a payment system (and Revel partner) that isn’t phone specific. 

At this point, the question doesn’t seem to be whether or not Google Wallet will catch on – it hasn’t – but how much longer until we’re ready for an NFC payment system? How do we cut through the increasingly thick red tape – and will we cut through it? Google recently acquired TxVia, a mobile payments solution, signaling it’s not giving up the fight. And there is still no iOS competition just yet, as Apple passed on NFC in the iPhone 4S.

Isis is really the one Google needs to watch out for. It’s backed by AT&T, Verizon, and T-Mobile, and Isis-enabled phones will be available this summer for its pilot launch in Austin and Salt Lake City.

Google Wallet has internal strife, a fragmented market, and a variety of competitors from all angles biting at its ankles. This is a troubled ecosystem, a hard one to change, and Google Wallet is running the risk of getting lost in that chaos. As Ciabarra pointedly put it, “Have you ever used it?  Have you ever seen someone else use it?  In San Francisco I always ask the cashiers if people use it and they respond that hardly any customers [have].  Enough said.”

It’s too early to label Google Wallet doomed, but it has a long, rocky road to wage if it plans to stick this NFC payment thing out.

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