Google Wallet Can See Formidable Challenge From Square This Holiday Season

December 1st, 2011 by Trefis Team
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Google (NASDAQ:GOOG) certainly has enough resources to scale-up its mobile payment unit, the Google Wallet. However, the search giant might be looking at a formidable competitor in Square. The mobile payment start-up has recently rolled out some innovative mobile payment initiatives which target customer loyalty in particular. Square can also be an indirect threat to Groupon (NASDAQ:GRPN), whose biggest pitch to merchants has always been to increase customer loyalty through running daily deals.

See our full analysis for Google’s stock

Square’s Value Proposition is Unique

The mobile payment business has always centered around making payments a low involvement process for users i.e. making the payment process as simple and quick as possible. Square provides some unique value propositions in this regard:

  1. Affordability: Square’s credit card readers are freely available to users in over 200 Apple stores. Given that merchants just need to install the Square app to accept payments, this is more economical than having a NFC-reading terminal installed by merchants for Google Wallet.
  2. Ease of Use: The latest update to Square’s Card Case app comes with a geo-fencing feature, that enables total hands-free payment if the user is in proximity to the merchant. [1] This even saves the effort of tapping the phone on the NFC-terminal.
  3. Scalability: Based on latest estimates, Square is presently being used by around 800,000 businesses. [2] Additionally, its potential user base is already large, given that the Square app and reader is compatible with the iPad, iPhone and Android-based smartphones as well.

The current NFC-enabled Sprint phone has sold close to 400,000-500,000 units, [3] with over 300,000 merchant locations where Google Wallet can be used. [4] While Google certainly has enough muscle to expand this further, Square’s simplicity and ease-of-use could steadily build user stickiness to its non-NFC mobile payment system.

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We currently have a price estimate near $628 for Google’s stock, which is around 10% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Company Streamlines payment via mobile ‘tabs’ [↩]
  2. Mobiledia: Square Expands to Challenge Google Wallet [↩]
  3. Internet Retailer: Delay Could Sap NFC Attraction for Consumers [↩]
  4. Technorati: Google Wallet Hits the Market [↩]