Google Work New Role, New Risk for First Data

Thursday, June 9, 2011 Google Work New Role, New Risk for First Data BY KATE FITZGERALD Google Inc.’s decision to rely on First Data At the launch of Google Wallet, the only Corp. to link its new mobile wallet to consumers’ accounts First Data will have to work with are tied payment accounts puts the merchant processor to MasterCard-branded cards issued by Citigroup and acquirer in a role that is new and, some say, Inc., and the only phone it will have to work with risky. is the Nexus S, a smartphone that runs Google’s First Data functions as a trusted service manag- Android software and is offered to Sprint Nextel er, performing a process called over-the-air provi- Corp. customers. sioning to bond a consumer’s payment account to a As long as Google has not revealed how it plans smartphone running the Google Wallet software. to expand Google Wallet, the effort is “not much This role “is definitely a newer area for us, but a different” from other mobile payment systems lot of other elements of the role, such as being safe- proposed so far, Oglesby said. keepers of consumer card data and managing card “I’m surprised at how very similar Google Wal- life cycles, are not new to us,” Dom Morea, First let is to the Isis mobile payment project,” a venture Data’s senior vice president of advanced solutions of the major telecoms, “and what Visa is working and innovations, said in an interview. to develop in various markets,” he said. Experts say that the risks have to do with scale. First Data may have no direct experience acting “Alot of” elements of the role “ Google Wallet today works with just one phone as a trusted service manager, but the company’s are not new to us,” Morea says. model, one carrier, one card issuer and one card Go-Tag contactless payment sticker, introduced in network. Over time things will become much more 2009, has helped to “inform” it on various aspects including providing merchants with contactless complex as other parties get involved. of the role it will play in connecting consumers’ payment terminals and the Google software that “It’s not necessarily a huge technical challenge phones with their bank account, Morea said. The merchants will need to handle payments through to put together a relatively small program like the Go-Tag sticker is meant to be adhered to a user’s Google Wallet, Morea said. one Google has outlined that only involves one phone, simulating the experience of using a phone First Data, of Atlanta, also will “help sell” bank,” Rick Oglesby, a senior analyst with Aite with a built-in payment chip. Google Offers, the mobile coupon system being Group LLC of Boston, said in an interview. Besides the Go-Tag, First Data last year also paired with Google Wallet, to merchants, Morea “The big challenge comes when you try to began offering memory cards supplied by Tyfone said. He would not specify how the service will scale it, getting multiple financial services play- Inc. that contain electronic wallet software. be promoted. Google plans to make money from ers involved,” he said. “Then it becomes far more First Data also faces uncertainty over “how open Google Offers, allowing banks to keep their full complicated. No one has done that yet, and the big Google plans to be with its open platform,” Todd share of transaction revenue from Google Wallet gray areas are business questions, not technology Ablowitz, president of Double Diamond Group payments. Analysts say First Data’s various roles questions.” LLC of Centennial, Colo., said in an interview. in Google Wallet’s initial phase will provide at First Data, a unit of the private-equity firm “To deliver on the promises Google has least a short-term advantage, but it will be unlikely Kohlberg Kravis Roberts & Co., is not going it made will require the founding companies to to endure when Google opens the program to alone. It will lean heavily on the South Korean get very innovative in designing these mobile multiple financial services providers, vendors and company SK C&C Co. Ltd., an expert in trusted payment platforms from the start, and we have networks, as it promises. service management and e-wallet services, through yet to see if the rhetoric matches the actions,” “At least initially, First Data has a big opportu- a partnership First Data signed last year. he said. nity here to be the only company offering Google The partnership with an experienced player First Data also will lead the initial movement to Wallet services, and it’s a window they should “will result in a solid, market-tested approach,” recruit and set up new merchants to accept con- maximize before it opens up further to competi- Morea said. tactless payments to participate in Google Wallet, tors,” Ablowitz said. ©2011 SourceMedia Inc. and American Banker. All rights reserved. SourceMedia, One State Street Plaza, New York, N.Y. 10004 (800) 367-3989.

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