When you are Google, it's a good thing to "lose yout Wallet" - your "Google Wallet" that is

The first story on my Bloomberg screen yesterday, as I sat in 6.00am Acela to DC read "Google Seen Scaling Down Wallet App That Consumers Spurned: Tech", from the Bloomberg BusinessWeek News wire. Here's the link to Bloomberg Business Week (FYI, I think they changed the title to "Google Wallet is leaking money").

I'll admit that I started reading the story and thought: "Wow, is Google really going to let Wallet go the way of AltaVista under Compaq and mismanage an 'ahead-of-its time' business? Have they become like any other corporate behemoth who is to big to innovate?" But after a little more thought and definitely after getting my coffee from the Café Cart, just after passing Newark, I thought: "If those folks are anything, they are bright". So as I read on about Google and their incursion into mobile payments I found:

1. that they spent over $300M to purchase several digital payment startups in order to improve and shore-up the application.
2. that God only knows how much more they have spent on R&D, marketing, sales, etc.
3. that they pay fees to the credit-card companies it works with that are actually making them lose money.
4. that the mobile payment market is poised to be at $90 billion, annually, by 2017, from around $13 billion last year.
5. and, finally, that they are now throttling the push to get into mobile payments by scrapping the card-accepting Android tablet and by abandoning some projects to broaden Google Wallet's appeal.
6. That carriers for the smartphones the app depends on were blocking the app altogether, limiting its potential significantly

 Google's core business values are centered around "making money solving real problems". As I thought of those six points in the story I couldn't help but think: what real problem are they solving with Google Wallet that merits that amount of spend? Will they be able to offer a better solution to their core customers through that spend? Of course, they can provide offline purchase information to their AdWords customers to better target me. But Google Wallet didn't seem like a good way to answer any of these questions because it failed to solve a problem: what would it solve for me, Joe User?

With respect to the Google Wallet for the user, what about it is so different from PayPal or a PayPal app for mobile payments? I'd still have to link my credit or debit cards which, by the way, I would have to reload every time they expire. Not to mention that I'd be dangling money in the face of hungry black hat hackers who could easily hack my Google ID and go crazy on my dime...And I have to use my phone which half the time is running a low or drained battery or could be stolen...and then what? Also, I am giving you information on most of my offline transactions, and what are you giving me, Google?
It became evident that the decision was not move out of mobile payments but rather to refocus those efforts to something that is more closely aligned to their core business. They got it, Wallet, as it is currently defined, wasn't working so they are slowing the ball down to take a good look at the field. After all, they are not in the business of acting as intermediaries in commercial transactions, they are monetizing on discovery, traffic, Marketing campaigns, Shopping, etc. They just need to refocus.

So by now the coffee was gone and I was chewing on my Kind bar and remembering how Google wanted to come out with a MasterCard card a couple of years ago. Clients would only be able to use it for AdWords and they'd still have to pay about 10%...so in essence, just another credit card.

As I passed Trenton, NJ, I started thinking, well, what would really be a solution to a significant number of people would be if Google came up with a way for me to not even have to use a Credit Card...and with Google being so ubiquitous...to not even have to use a credit card anywhere in the world! Why not? After all, they do have about $52 billion in cash to fund something like this, per the last 10-q.

Imagine a Google Card (or Wallet, if they insist) where you don't pay fees, and the interest is only inflation, where you don't have to worry about foreign exchange fees gouging you when you travel! I would use that, and gladly pay Google in the same currency I've being paying them so far for using their services: my information. And if they even wanted to make it a purely online bank where I can deposit my paycheck and they don't charge me any fees, and even pay me a small interest on my checking account balance, they would also know exactly how much I make after tax.

Imagine how much something like this could grow Google Shopping, if sellers who accepted Google Card/Wallet let you pay a lower price because Google Wallet charges THEM NO FEES?! That would make Amazon shake in their boots. Google would be able to directly target me based on my complete profile: my virtual world + my offline world. And I'd be happy to do it and let them make money off of someone else who wants to sell something to me.

In summary, I don't believe that "Google Wallet is leaking money", I believe that Google Wallet could be the stepping stone to something very different and much greater that only Google can monetize given their massive traffic, their level of investment in mobile payment technology and the challenges they learned from by interacting with the carriers and credit-card companies that are not interested in helping Google Wallet now.