This was more or less an inevitable outcome: the Samsung Galaxy Nexus on Verizon is not going to launch with the Google Wallet. Verizon has said that it is not blocking the application but rather that the company is working with Google to make sure that Google Wallet is up Verizon's technical and security standards. Does that mean we will see the Google Wallet on the Galaxy Nexus eventually? Perhaps, but the whole scenario is a series of convoluted partnerships and expectations.
This is exactly what we thought would happen to the Google Wallet. As we noted earlier this year, the first partners are losing their exclusivity by the end of the year. It looks more likely now that the exclusivity lasted until the Galaxy Nexus was launched. Either way, there are too many players in the ecosystem and all want a piece of the action.
Google could not expect to just embed the Google Wallet onto Galaxy Nexus phones and pass it off to carriers without some type of backlash. In its statement concerning the lack of Google Wallet support on the Galaxy Nexus, Verizon issued this statement:
"Recent reports that Verizon is blocking Google Wallet on our devices are false. Verizon does not block applications. Google Wallet is different from other widely-available m-commerce services. Google Wallet does not simply access the operating system and basic hardware of our phones like thousands of other applications. Instead, in order to work as architected by Google, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in our phones.
"We are continuing our commercial discussions with Google on this issue."
Let's break down exactly what Verizon is trying to say here. The Google Wallet is an m-commerce solution. Check. The Google Wallet is different because it institutes NFC, a security chip and is fundamentally different than other m-commerce options. Check. Google Wallet needs to be integrated into our phones in a secure and proprietary hardware in our phones. Check ...
Outside of software that Verizon adds and the ability to run LTE/CDMA capabilities, what is Verizon really bringing to this phone? Google and Samsung designed it. Verizon is the carrier and the one that is going to subsidize the phone to consumers. So, yes, Verizon should have some type of say as to the functionality of the phone. Verizon is also Android's largest global carrier, so it has a certain amount of clout to play politics.
Verizon cannot legally block applications and so far it has said that it is not actually blocking the Google Wallet on the Galaxy Nexus (see the explanation of why Verizon cannot block applications on its spectrum at SplatF). In that vein, the company's statement above does not make a lick of sense. Technically, everything is fine.
I hate to say I told you so... but, I told you so. In earlier articles in our mobile payments series, we questioned whether or not NFC and the Google Wallet could actually make any headway into the mobile payments space based on the complexity and composition of its partnership structure. The first Google Wallet announcement had very specific requirements: Sprint, Mastercard, Citibank on the Nexus S. I am yet to meet anybody who qualifies in all those areas outside of people purposely use all those services to get Google Wallet capabilities.
Google is going to experience pain points on the way to mass adoption with every new partner it brings into its mobile payments ecosystem. You think Verizon is going to be the only one? Absolutely not. AT&T will drag its feet too. T-Mobile, the whipping boy of the carrier environment, will probably not have a choice, as long as it is independent.
Yet, what about new banks? Other financial institutions? You think MasterCard is going to be happy when Google tries to tie Visa and American Expresss to the Google Wallet as well? Both of those companies have their own large investments in mobile payments infrastructure and methods.
Here we have a classic example of corporate culture and the failure to innovate. Once a company gets to a certain size, bureaucracy and middle management slow down the entire innovation process, usually in the name of "growth." Decisions are harder to make. Now, take about a dozen companies, all with billion dollar bankrolls, and try to get them to play nice with each other.
We have written about the confluence of the tech and payments industries and what that means for mobile payments going forward. Verizon is a different type of entity, a tech company but also a communications company. The biggest fears that the telecoms have is that they will be turned into "dumb pipes" without any control of the content and data flowing over their networks. That is why Verizon has its own Android app store and why it is a partner with ISIS. If transactions are going to be made over Verizon's networks, the company wants a cut.
Too many hands in the cookie jar, all with big, brutal sticks to make sure they get the biggest and best cookie. Eventually, this will all sort itself out. It is just going to be an ugly mess until we get to that point.