A month ago, I wrote a paper on the emerging mobile payments ecosystem, which devotes a section to Google Wallet, its strategy and the challenges it face. You c

A month ago, I wrote a paper on the emerging mobile payments ecosystem, which devotes a section to Google Wallet, its strategy and the challenges it face. You can read the whole paper here: http://www.box.net/shared/fsiv1bu7ugrpp814aucx http://www.box.net/shared/fsiv1bu7ugrpp814aucx Google's Strategy: Google has indicated that it will not collect an interchange fee on transactions made through Google Wallet which shows that it has its eye squarely focused on the Payment Context. Google understands it stands to gain very little from the current revenue and expense sharing arrangements in place today for traditional payments. Google expects to employ a strategy similar to where they made Android a compelling “better than free” option to handset makers by offering to share a portion of search-based advertising revenues generated through the Android ecosystem. Google also plans to lease space on its wallet solution to banks for free, compared to ISIS who will charge a rental fee. Google however has not made clear as to whether it plans on controlling the secure element outside of Nexus S, on handsets that run Android, despite not being in direct ownership of the master keys. Challenges to GW: Google Wallet's secure element resides on the handset, which is different from Carrier led mobile wallet initiatives(e.g. ISIS). Google Wallet is designed to be interoperable, so as to attract more partners, but so far its olive branch has not been met with reciprocal affection from other players in the payment ecosystem. If ISIS Carriers (Verizon, T-Mobile & AT&T) mandate that any and all mobile wallets must work through ISIS to function on their carrier networks, Google may be forced to modify Google Wallet so as to work with a SIM based secure element. Also Google Wallet’s launch outside of U.S may run counter to European mobile operator’s current business model where they charge fees to banks and other service providers for putting their NFC applications on SIM cards owned by the Telco’s. As Google attempts to court European banks to be part of the Google Wallet initiative, this could deter European mobile operators from adopting Android handsets if Google continues to unilaterally control the embedded secure element. Even though Google Nexus S supports SWP (Single Wire Protocol) that allows a mobile operator to put the secure element in the SIM, Google has opted not to enable this capability in Nexus S. It would be great to hear other opinions on what I outlined above, and within my paper.