Google's Potential Angle on Mobile Payments

Google will begin testing a mobile payment service at stores in New York and San Francisco within four months, Bloomberg has reported. And there is a potentially-important element of the test: Google is paying for the terminals required to accept mobile payments built by VeriFone systems. You might argue that is part of any test, and you would be right. But even as tests go, Google reportedly is paying to install "thousands" of merchant terminals, apparently removing "cost of terminals" as a retailer objection.

Okay, you might say, it's a big test. But this is Google, a company that has demonstrated the ability to spend gobs of money on browsers and operating systems without any direct monetization scheme. In fact, one might argue that Google has proven willingness to spend heavily primarily so other providers will also spend money and thereby improve the utility and value of products in whole categories.

The reason, some would argue, is that Google believes it benefits when the whole application and device ecosystem gets better. That makes Google a dangerous competitor. It can ignite development arms races. It might also be willing to answer one obvious objection to faster and broader adoption of mobile payments, namely the need for a retailer to spend money upgrading the payment terminals.

It's just a question, but to what extent might Google be willing to defray the cost of terminal upgrades as part of an effort to spur wider adoption of near field communications payments at retailer locations? You might argue that is a big proposition, and that Google could not hope to get an immediate return in any direct sense.

But as has been the case for other innovations, Google might bank on its ability to create something new and meaningful at the point of sale that does create direct revenue for the rest of its advertising business, broadly defined (coupon and other direct offers, though classically considered "promotion" rather than advertising, are a growth area).

Maybe Google ignites a virtuous cycle where other contenders themselves move to subsidize new retailer terminals. By its historic logic, Google still wins.

Google Is Said to Test Mobile-Payment System With VeriFone - Bloomberg