Google Wallet has become a money pit for Google. After spending about $300 million in acquisitions and developments, the app has been downloaded fewer than 10 million times over two years. Furthermore, while Google never intended to make money on the transactions themselves (the company produces revenue by using transaction data to develop targeted ads), the fees to the credit card companies are so high that they are losing money on every transaction. This has led to Google abandoning many of its plans to expand their wallet program.
From Business Week:
Google is weighing whether to scrap a Wallet credit card it’s developing, according to three people familiar with the project. It’s already changed its plans to build a Wallet-compatible Android tablet that can read credit cards for brick-and-mortar retailers, intended to rival Square’s card-reading tool, according to four people familiar with that project.
A significant cause of these struggles is that three of the four largest mobile network operators (MNOs) are preventing their subscribers from using Google Wallet. While Sprint supports the app, AT&T, T-Mobile, and Verizon have formed a joint venture to develop their own mobile wallet named Isis. Google can’t expect to develop a successful product when the vast majority of consumers are prevented from using it. If Google Wallet is to become profitable, Google needs to either come to an agreement with the MNOs or find a way to work around them. As the MNOs have strong motivation to prevent the growth of Google Wallet, the latter seems like the most effective strategy.
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