M-Pesa, Google Wallet & PayPal: How do they stack up?

Last week Google added to a busy period of big product releases with the launch of Google Offers. The Google Offers launch followed hot on the heels of the launch of Google Wallet.

Added to this, PayPal is suing former employees for giving away trade secrets to Google which allegedly fueled the development of Google Wallet.

So what exactly is Google Wallet?

Google Wallet is a new point-of-sale ecosystem that will allow users to use their smartphone as their wallet. This does however require a smartphone with an NFC (near field communications) chip.

Currently three forms of payment are supported by the system — Credit card, Coupon and Reward Coupon.

Google Wallet is a retail solution and very much aimed at the offline world using online as a part method of payment and enablement.

So what about the other payment platforms out there such as PayPal and even the venerable M-Pesa?

Well, for one, M-Pesa occupies a very different segment of the payments industry.

M-Pesa has been a phenomenal success since its launch by Safaricom as a Vodafone owned initiative in Kenya. The service now sees more than 2-million daily transactions and more than 10-million users.

The initial concept behind M-Pesa was to create a service that allowed microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers. But this soon rapidly expanded into offering unbanked individuals the opportunity to conveniently and safely transfer cash around the country.

M-Pesa allows for the following:

• Deposit and withdraw money,
• Transfer money to other users and non-users,
• Pay bills,
• Purchase airtime

The service which also runs in Tanzania and Afghanistan was launched in South Africa in September last year as a joint initiative between mobile service provider Vodacom and one of the country’s big banking groups, Nedbank.

While the uptake is nowhere near the success of other African countries, South Africa sports around 100 000 subscribers. Both Nedbank and Vodacom believe that there is a potential 13-million strong target base that can benefit from its use.

So is M-Pesa a direct competitor to Google Wallet?

At this stage, no. Google and M-Pesa are operating at opposite ends of the spectrum. Google Wallet caters to the upper end of the market that is already online, have credit cards and shop at retail stores.

M-Pesa is targeted primarily at the unbanked, lower end of the market that need to transfer money and other financial services using their mobile phone.

And PayPal?
PayPal on the other hand seems to be a bit of an oddity these days, long dominating the online payment space by offering secure transactions to buyers and sellers without the need for a credit card.

The problem with PayPal is that it has alienated many users with its cumbersome system and requirements.

With this PayPal seem to have lost momentum in innovating products that integrate not only into the mobile environment but that can provide much more value into bricks and mortar stores.

That’s where Google’s master plan kicks in.

The almost-combined launch of Google Offers and Google Wallet is part of a masterstroke by Google to not only enter the payment industry in a big way but to offer a link from the online world to the offline world.

Google still makes most of its money from search. Android, while having been taken up by almost a third of smartphone and tablet users, doesn’t generate any money for the search behemoth.

So by offering a link from Google’s search platform into offline retail sales, the search engine is focusing on the holy grail of making money. This is something that has eluded the online world for all this time — integrating online with offline in one complete picture.

Google can now offer advertisers the ability to target users online and then drive them to bricks-and-mortar stores to purchase or redeem special offers and track the whole sales process.

M-Pesa, while valuable in its own right, just doesn’t have that ability — at least not now.

As for PayPal, we will have to wait and see what happens. The fact that it is suing Google seems proof enough that they are worried.

Even though Google has deep pockets and great engineering talent, the company has failed in many of its ventures, with the exceptions being search, GMail and to some extent, YouTube.

But this latest development is the most interesting yet from Google.