Defects of Google’s Cloud-based Wallet Service

Google-Wallet-service-Cloud-rfid-blogGoogle is now re-launching its NFC wallet service which supports the new Android-based handsets. It’s good news to those tap & go fans that the service now supports a much wider range of cards. However, there are still major limitations to its usage:

First, the service is still available for U.S. ONLY, which is specifically designed for U.S. magstripe payment networks.

Second, it must be connected to the Cloud in order to authenticate the user and switch cards.

Finally, it ONLY supports Android handsets which have the secure element that Google has used to pre-issue its own pre-paid MasterCard PayPass card, along with the original Citibank card.

The deadly weak point of Google is that it will have to take the risk and pay the cost for all contactless transactions, instead of the bank that has its cards linked into the Google Wallet Cloud. Google is actually putting its own “card-present” contactless card transactions into less secure e-commerce transactions in the Cloud.

What’s more, since this is a Cloud-based service, switching or activating cards and logging into Google Wallet will require mobile connectivity. On the other hand, most NFC wallet services being deployed in Europe that work with the EMV card technology support offline functionality for essential tasks such as card switching and PIN authentication.

MasterCard and Visa are now mandating that U.S. banks also migrate to EMV, which suggests that Google will need to do likewise in the very near future, or it’ll need to invest a lot more to win the banks over with this new Cloud-based service.

An interesting future direction for Google with this approach is that it is possible to get its pre-paid card into network operators’ SIM-based wallets, and maybe migrate Google Wallet onto other non-Android devices. Many people are waiting to see where Google goes next in the U.S. and other markets with this approach, especially in this budding mobile wallet space that the network operators and banks are teaming up and getting ready for their own non-Cloud-based wallet roll-outs.