Chapter 11 Case 1
One of the fastest-growing segments of the online payments business is mobile payments. U.S. mobile
payments are expected to reach $140 billion by 2019 and purchases using mobile devices could account
for half of all online retail sales by 2017. Google introduced one of the first digital wallet products that
would work on a mobile device in 2011 when it also introduced support for the operation of NFC chips in
its Android mobile operating system. Google Wallet stores a MasterCard account for users that agree to
maintain a cash balance with the card’s issuing bank, so it operates essentially as a debit card. Google
Wallet does not charge a fee to merchants or the MasterCard issuing banks, nor does it charge a
transaction fee. Instead, it generates revenue from advertisers who pay to display ads, offer coupons or
other promotions (specific ads are displayed based on the mobile device’s proximity to the stores that
are making the offers). Google Wallet has been slow to catch on with users. In 2014, Apple introduced a
digital wallet product for its mobile devices called Apple Pay. In operation, Apple Pay is similar to Google
Wallet; however, the infrastructure and revenue model is different. Apple Pay charges the issuing banks a
fee of 0.05 percent of the transaction amount and guarantees each transaction; that is, if the transaction
is fraudulent, Apple will cover the loss. Credit card companies normally charge merchants a fee ranging
between 2 and 3 percent of the transaction amount, so the additional Apple Pay fee serves as a lowpriced insurance plan for them. Consumers will not be charged at all for using Apple Pay and will not be
given advertising messages. Further, Apple has stated that it does not collect information about
consumer buying habits from Apple Pay data. Apple arranged for American Express, Discover,
MasterCard, and Visa credit cards to be included in their system, along with a group of large card-issuing
banks. They also included major retailers such as Bloomingdales, Disney, Staples, Walgreens and Whole
Foods. These participants will be able to collect data on consumer buying habits, but only on those
consumers that use their card or shop at their stores. Apple reported that more than a million credit
cards were registered with Apple Pay in the first three days it was available. After Apple Pay’s
introduction, an increase in the number of retailers that accept NFC payments (as you learned in this
chapter, NFC technology is used by both Google Wallet and Apple Pay) caused an increase in the use of
Google Wallet.
1. Compare the benefits and drawbacks of Google Wallet and Apple Pay from a consumer’s standpoint, a
retailer’s standpoint, and a bank’s standpoint.
search engine or the resources of your library, learn more about Android Pay and explain why you think
Google decided to develop this new product. In your answer, be sure to consider why Google also
decided to continue offering its Google Wallet product.
2015 by the Merchant Content Exchange, a company owned by a consortium of large U.S. retailers.
CurrentC avoids the charges imposed by credit card issuers by using debit cards, but debit cards do not
provide the same level of fraud protection as credit cards. Using your favorite search engine or the
resources of your library, learn more about CurrentC and outline this product’s chances for success. Be
sure to include a discussion of the benefits and drawbacks of CurrentC in your answer.
engine or the resources of your library, learn more about these banks and their plans – evaluate the
likelihood of a bank’s success in introducing its own digital wallet.
