5 Things SMBs Should Know About Google Wallet

Google Wallet has been a bit of a slow starter. Since its 2011 launch, consumers have had very limited options for filling their digital wallet. It was too easy to leave home without it.

That began to change this week, with Google's announcement that consumers can now add any debit or credit card to their Google Wallet account.

Google Wallet has three components: The first enables consumers to pay for in-store purchases using their phone; the second facilitates online payments; the third allows game developers to charge for virtual fare within a game experience.

[ Mobile payment technology may be starting to gain momentum, but what about security? Read NFC Phone Hacking And Other Mobile Attacks. ]

Let's look at five more things SMBs should know about Google Wallet:

1. Near-field communications (NFC) technology is immature.

Consumers need a NFC-enabled phone to use Google Wallet in a physical store. Today, there are only six phones that will run the Google Wallet app. (No, Apple's iPhone isn't one of them.) It will also be available on Google's new Nexus 7 tablet. The takeaway: Even if you invest in a NFC reader for your retail location, you're not likely to be overrun with customers clamoring to tap their payments just yet. "We expect NFC usage to remain niche in 2012 and even 2013," wrote Forrester analyst Thomas Husson, in a blog post.

It's going to take some time--and a wider menu of compatible mobile devices--for NFC to approach anything close to mainstream. Husson said he expects "moving forward, NFC will be embedded in most smartphones--and in a greater range of connected devices." Forrester estimates close to 100 million NFC-enabled devices will ship by the end of the year.

2. Google Wallet vs. PayPal: Competition will heat up.

The new online version of Google Wallet better positions it as a direct competitor to PayPal for Internet transactions. As such, it gives SMBs another choice for accepting payments on their websites. That's usually a good thing when it comes to pricing, service, and product innovation. PayPal's got a large lead in this race; among other things, it has a much longer track record servicing online payments. Expect the battle for consumers and merchants, both online and on mobile devices, to grow fierce--more on this below. (PayPal sued Google back in 2011 when the first version of Google Wallet was released.)

In the meantime, the two companies offer very similar pricing for merchant processing: Both start at 2.9%, plus $0.30 per transaction, with discounts based on monthly sales volume. Those discounts are the same, though PayPal tells businesses that do more than $100,000 in monthly transactions to call for pricing. One apparent difference: Google isn't charging additional fees for using Google Wallet with an existing payment processor; PayPal charges a one-time setup fee and $19.95 per month to do so.

3. Your larger competitors are already using it.

If you're a consumer retailer, it's worth noting that some big brands are already kicking the tires on Google Wallet, or at least on NFC payments. Google lists chains such as Banana Republic, Macy's, and Toys 'R Us among its "Google SingleTap" partners, meaning those stores offer one-touch Google Wallet payments. The likes of CVS, Home Depot, Peets Coffee, RadioShack, and many others use MasterCard's PayPass NFC readers, which accept Google Wallet payments.

4. Mobile payments or mobile payment processing?

The phrase "mobile payments" is often used interchangeably for two different things. It can refer to consumers paying for purchases with their mobile device instead of cash or plastic. It can also refer to the growing number of platforms--like Square, Intuit GoPayment, and PayPal--that retailers now use to swipe debit and credit cards with their smartphones and tablets, instead of using a traditional merchant processor. Google Wallet doesn't offer such functionality.

5. Don't put all your payments in one processing basket.

Mobile devices aren't going away; they're already changing how you interact with customers and will continue doing so, including how you accept customer payments. But it probably wouldn't be wise to bet everything on a single provider or platform just yet. Forrester analyst Denee Carrington, in a blog post on "the digital wallet wars," noted, "We are in the early stages of unprecedented innovation and transformation of the consumer payments industry, and emergence of a digital wallet marketplace is the next act."

In other words: Expect tons of change. Google has the resources to go 12 rounds with any competitor in the space, but mobile payments aren't its rainmaker, and the company's never been shy about killing off products in the past.

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