Is Google or PayPal Leading the Charge in Mobile Payments?

PayPal made a big splash yesterday, saying that it now has commitments from 16 major retailers to roll out PayPal at the register.

Additionally, it said it is partnering with four software providers to gain access to 50,000 small- to medium-sized merchants.

Meanwhile, tomorrow will be exactly a year since Google launched its mobile wallet.

So, you ask, which large technology company is winning the race to gain the hearts and wallets of consumers and retailers?

Pretty clearly, it’s neither.

Google may have gotten off the blocks first, but ever since, it has been plagued by execution issues and management departures. In contrast, PayPal has a lot of institutional advantages, but it still has a long way to go before it is synonymous with Visa or MasterCard.

Here’s just a snapshot of the two companies’ advantages and disadvantages:


Pros: It has relationships with 25 national retailers, totaling 140,000 locations.

Cons: It bet too early on using near field communication technology. Sprint, the third-largest U.S. wireless carrier, is the only provider so far that is backing it and it’s deployed on only six Android devices.


Pros: There are 110 million people using PayPal worldwide, who are on track to spend a record $7 billion in mobile payments this year using PayPal on the phone.

Cons: The company is expecting to deploy with 20 retailers by year’s end, but based on the 16 retailers announced yesterday, I calculated that it has access to about 16,000 U.S. locations (far fewer than Google Wallet). That does not include the thousands of locations that those 50,000 small- to medium-sized retailers would contribute if they signed up for it.

Clearly, it is still early days.

And when you look at the broader market opportunity, the race is not just between Google and PayPal. All of the incumbents, including American Express, MasterCard and Visa, have announced digital wallet strategies. And then there are the start-ups, such as Square, which is seeking a $4 billion valuation in its next funding round.

There are two points to be made on the debate between PayPal vs. Google Wallet that can’t be stressed enough: PayPal has the user base, and it has the technology with the lowest barriers to entry.

In theory, if a consumer has signed up for the service from their PayPal account, they will be able to conduct a transaction using their mobile phone number and PIN — without changing carriers or phones. Likewise, merchants won’t have to upgrade their point-of-sale hardware.

In an interview, PayPal President David Marcus acknowledged there’s a chicken and egg problem: Without a lot of locations, there won’t be a lot of consumers using it. But this year is about learning and testing, he said, and next year, “it will be about iterating and full-on execution.”

If you asked the folks at Google, I’m sure they would agree. A Google spokesperson declined to comment for this story, but already, there are signs that Google has learned a lot and has started to pivot.

Rick Oglesby, a senior analyst with Aite Group, believes that Google is distancing itself from NFC and from being the merchant of record.

“I think they will follow the path of least resistance, because for them, it’s not about payments — it’s about advertising,” he said. “It’s about pay-for-performance marketing. Just like how they get paid for a click-through on the Web, they want to get paid when you walk through the door — but no one is monitoring that.”

Last month, Google purchased TxVia, a little-known payments technology company, another sign that it’s changing directions.

Tony Felice, a senior digital strategist for Vladimir Jones, who worked with TxVia at his former job at Red Door Interactive, said TxVia and Google Wallet together can be very powerful. He said TxVia has all the banking relationships, which will help enable payments, gift cards and other services, and also has the ability to produce analytics about what consumers are doing and spending money on.

“Together, they will be able to get a 360-degree picture from the moment of truth to purchase,” he said. “In order to do that, you have to pull in disparate sources and synthesize it in a single place. The transactional data from TxVia is just one piece of a puzzle.”

Oglesby said despite Google’s hiccups, it’s not yet out of the race.

“It’s been a slow-growing situation, and there’s been big turnover on the executive team, but they are reassessing the situation and have made an acquisition,” he said. “I wouldn’t say they’ve screwed up because no one has run way ahead of them. They were leading the market, and tried an approach, and now there’s other approaches for them to try.”

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