Now Google Up Against a Consortium of Retailing Giants
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Google’s (NASDAQ: GOOG) footprints are across all areas of the business world. The world’s largest online search provider turned world’s most used smartphone OS maker has been in the news a lot lately thanks to the Apple-Samsung lawsuit, the success of the Nexus 7 tablet, the failure to launch of the Nexus Q and definitely the ultra high-speed internet cum TV service Google Fiber, among many others. The company has been diversifying from its traditional online search and online ad business and is expanding in to loads of new business areas.
One of the areas where Google plans to grow is mobile payments. Google has a cloud-based mobile payment service called Google Wallet for which a mobile app is also available. With this offering, Google will make it possible to use a smartphone as an e-wallet, a brilliant substitute for cash and credit card. However, to date this offering hasn’t seen huge success and its best days are yet to come when the mobile payment market actually starts growing. The giant has taken several steps to position itself as a safe provider of mobile payment service and has done a lot to educate users about the safety of the mode of payment. And now, just when the time was coming to enjoy the fruits of its hard work, Google is being faced with a new source of competition – the retailing sector.
The new consortium
The mobile payments space is not yet developed. But players in related spaces actually believe that this sector will hit it big in days to come and that’s why competition is slowly intensifying and more and more players are trying to get a share of the market before it is too late. Recently, 14 big retailers created a consortium and they together decided to launch a new mobile payment network called Merchant Customer Exchange (MCX). Among these 14 retailers, some of the big names are Wal-Mart (NYSE: WMT), Best Buy (NYSE: BBY), Sears (NASDAQ: SHLD) and Target (NYSE: TGT). These retailers together account for more than $1 trillion of revenue yearly and they believe, owing to their scale of operations and spread across geographies, MCX will be a huge success and will become a new standard for mobile payments. These retailers with their brain child MCX will be combating with the Google Wallet, which the giant launched in partnership with Citigroup, MasterCard and Sprint among others. MCX will also be up against Isis, the mobile wallet system that belongs to big names such as Verizon, AT&T, JPMorgan and Barclays among many others.
MCX will help users pay their bills through their smartphone and thus its basic offering will be no different than that of Google's and the Isis. Yet the retailers strongly believe it will be more successful -- the reason behind their faith being their deep understanding of the customer’s shopping and payment experience. The ultimate motto of MCX is to make the user’s experience more engaging, convenient and efficient.
In the words of Mike Cook, corporate vice president and assistant treasurer of Wal-Mart, “MCX will leverage mobile technology to give consumers a faster and more convenient shopping experience while eliminating unnecessary costs for all stakeholders.” One advantage the MCX will enjoy is that Google and other initial players in this market have prepared the base on which the payment mode can grow. These original players have almost cleared the initial obstacles and now the consortium of retailers can smoothly enter the space and reap the benefits as soon as the infrastructures are ready. However, it’s not clearly know which technology MCX will be using, there is no definite launch date and even the mobile application is in the process of being completed. The consortium plans to make the application such that it will run on any smartphone and thus pose as competition to the carrier-based payment platforms.
This is not the first case of competition Google is facing in this less-explored mobile payments space. Google Wallet, an app in all Android-powered smartphones, is being blocked in handsets from the largest US telecom carrier, Verizon, as a measure to reduce competition for Isis. So from this it can be understood what cut-throat competition exists in the space. Apart from these 14 retailers, many others are also planning to enter this potential-rich market space. Recently Starbucks announced that it will be partnering with Square to allow its customers to pay for their coffee through Square’s mobile app. Even the online shopping mall eBay through its PayPal offering announced its plans to enter the mobile app-based payment space after hitting it high in the online payment space. And last but not the least, the mighty Apple is also expected to enter the market very soon.
According to a recent study conducted by Juniper Research, the mobile payments market is expected to grow almost 400% to over $1.3 trillion per year. Gartner, a little more conservative than Juniper, expects the space to grow to become a $617 billion market by 2016, up from current $171.5 billion. Either ways, it is pretty clear that this market has huge growth potential and this also explains why anybody who is anybody is rushing to get a foothold on this market.
With only 11% of the population with mobile phones using mobile payments, there is a lot of space to grow and Google needs to make sure it maintains and expands its hold on the market. With access to inside information about shoppers' purchase behavior, the retailers may stand up to be a huge market-snatcher from Google. However, Google’s advantage here is that it is already ready with its cloud-based payment offering while the consortium is still in the planning and work-in-progress phase. This gives Google ample time to improve its offering. The Android maker needs to carry on doing what it does the best – innovate, improve and grow.
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