Google launched its new Wallet application, which allows consumers to shop by simply tapping their smartphone at a PayPass checkout, in September. The app uses a relatively new technology (in terms of its applications to personal finance and payment methods) called near field communication (NFC) to send payment information to the reader and carry out the transaction, eliminating the need for carrying cash and credit cards.

The Google Wallet app stores information from the user’s credit card, gift cards and loyalty cards on the Android smartphone. Currently, the app’s availability is very limited because it can only be used in the US with a Nexus S on the Sprint network and only supports Citi MasterCards and Google Prepaid cards. However, more cards, including Visa and American Express, are expected to be supported at some point in the future.

So, how will the introduction of something as radical as Google Wallet affect the use of credit cards?

Although the intention is to completely eliminate credit cards in the future, the actual credit product will still exist, just in a different form i.e. as a digital file rather than as a plastic card. The ease of use of Google Wallet could encourage more people to use credit cards for small purchases such as coffee or lunch.

At the moment there will be few users of the Google Wallet due to the lack of availability so it will be difficult to tell how it is impacting upon credit cards. However, once the Google Wallet app rolls out to UK Android-powered smartphones we could really start to notice a difference.

Android became the top-selling smartphone operating system in the UK this year, with the last six months seeing Android devices account for 44% of all smartphone purchases. While the market is incredibly tight, David Gosen, managing director at Nielsen, said that “the momentum is with Android at the moment”.

Advantages of Google Wallet

There are so many advantages to using mobile wallets, such as Google Wallet. One example is the convenience and speed at which consumers can make small purchases.

One thing of particular interest is that Google Wallet can store multiple credit cards and the loyalty programs attached to them, meaning that consumers never miss out on their discounts.

According to the Google Wallet FAQs page: “It [Google Wallet] stores virtual versions of your existing plastic cards on your phone, along with your coupons, and eventually, loyalty and gift cards. Our intention is that Google Wallet will be an open mobile wallet holding all the cards and coupons you keep in your leather wallet today.”

The Google Wallet service is completely free to both merchants and consumers, perhaps making it worthwhile for small businesses in the UK.

Disadvantages of Google Wallet

The app stores personal credit card information inside the phone, and so, as expected, there have been plenty of consumers with security concerns.

Google has tried to eradicate these fears by saying (on the Wallet FAQs page): “Your payment credentials are stored in a chip called the Secure Element contained within your Nexus S 4G. The Secure Element is isolated from your phone’s main operating system and hardware. Only authorized programs like Google Wallet can access the Secure Element to initiate a transaction. Additionally, because Google Wallet enforces a PIN, the only way to transmit payment credentials is if you first enter the PIN.”

Google Wallet is not the only mobile wallets system heading to retail outlets because PayPal, the worldwide leading electronic payments giant, is also joining the battle soon. Also, let’s not forget Square (created by Twitter founder Jack Dorsey), which uses different technology to NFC and is funded in part by Visa.

Possible impacts of Google Wallet launch in UK on credit card use

1. The introduction of Google Wallet could have significant impact upon the number of people using credit cards and prepaid cards to pay for smaller items because the new technology is specifically designed for point of sale in personal transactions and would be used mainly in restaurants and shops.
2. It is thought that Google Wallet could impact upon the number of hotel and ticket bookings made online as users are currently frustrated with repeatedly entering credit card details into websites only to find that the tickets have been re-released due to a ‘time out’ period. Managing director of advertising and marketing for Google, Rob Torres, has said that 53% of business travellers would be willing to book on a mobile device. This information from a Google survey reflects numbers found from TravelClick which is currently experiencing year-on-year mobile bookings growth of 1355%.
3. The number of credit cards issued could increase because users are able to load digital ‘copies’ of multiple credit and prepaid cards on to Google Wallet and will not have to carry them around in a bulging wallet.
4. While Google Wallet may increase the use of credit, it could also have the opposite effect with more and more consumers turning to prepaid cards as a suitable alternative.

Obtaining credit in the UK

Consumers who are interested in obtaining new credit or prepaid cards to use in association with Google Wallet when it launches here in the UK need to ensure that they choose the right one. It is essential that individuals compare credit cards and prepaid cards to get a card that best suits them. Online comparison websites allow consumers to access tools and tables enabling them to compare credit card interest rates, charges, credit limits and eligibility with ease.