Google Beats Apple (Finally)

For years it's been Apple (Nasdaq: AAPL  ) putting rivals on the defensive with simple-to-use tech in its iOS devices. No longer. Google (Nasdaq: GOOG  ) has the lead now.

Yesterday, the Big G made good on a promise to launch its Google Wallet pay-by-smartphone service before the end of the summer. Apple has been rumored to be working on something similar for its next-generation iPhone, but it's Google that is working with American Express (NYSE: AXP  ) , Discover Financial (NYSE: DFS  ) , and Visa (NYSE: V  ) , as well as initial partners Citigroup (NYSE: C  ) and MasterCard (NYSE: MA  ) . Talk about a coup.

To be fair, first-mover advantage has never been Apple's strong suit. The Mac maker typically waits, observes, and then introduces tech that leapfrogs the existing paradigm in terms of usability. Think of iTunes. While existing paradigms for downloading music existed before it came to be, it was Apple that created a piece of partnering hardware (i.e., the iPod) and convinced labels to sell individual tracks for $0.99 apiece. Apple's simple strategy has proved to be incredibly effective.

Simplicity matters here, as well. But partners might matter more. After all, Google Wallet is nothing more than software that wirelessly connects a near-field communications (NFC) chip inside an Android phone with a payments terminal. Neither device means much without the ability to process payments through a major credit or debit service. Google has now solved that problem.

And while Apple hasn't said anything in this area, it wouldn't be difficult for the Mac maker to create its own payments system. Indeed, it already has one: iTunes. I've used iTunes credit this way -- mostly for buying digital comics through services such as comiXology.

There are also the times I've used iTunes to pay for movie rentals, TV-show downloads, and music tracks. My son has used iTunes for in-game purchases, validating Zynga's well-publicized social-gaming business model. What prevents Apple from making iTunes an even more prolific payments processor? Answer: nothing.

Imagine your iPhone connecting to an iTunes terminal located near the register at your favorite spot in the mall. Your purchase gets processed through your iTunes account, which is connected to a major credit card issuer. No additional partnerships required.

Seem far-fetched? Maybe, but having an iTunes payments terminal would also bulk up demand for iTunes gift cards, boosting Apple's apparently supernatural ability to generate cash.

But that's what could be. Google Wallet is already here, is available on Samsung's Nexus S, and is compatible with all five of the major credit and debit card issuers. It's your move, Apple. Make it a good one.

Do you believe the next iPhone will include a service like Google Wallet? Would you want a service like that? Please weigh in using the comments box below. You can also keep track on developments in digital payments by adding any of these stocks to your Foolish watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Citigroup, Apple, Google, and MasterCard. Motley Fool newsletter services have recommended buying shares of Google, Visa, and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 21, 2011, at 2:59 AM, kariku wrote:

    How exactly does G beat A? Considering how crappy and insecure Android apps are, and that the user has to tweak the system for every small thing (e.g. app loaded in RAM vs SD card), I don't see the average Joe flocking to Android and using it for payments.

  • Report this Comment On September 21, 2011, at 8:05 AM, jdmeck wrote:

    As a person who does not have or plan to buy a smart phone, this means nothing to me. As a person who is invested in Apple... no, this still means nothing to me. I work in the financial area. People have been very slow to move to electronic payments by smart phone. I'm sure that will change, but I don't think it will ever be the main reason why a person would pick one brand over another.

  • Report this Comment On September 21, 2011, at 2:52 PM, sheldonross wrote:

    " I don't see the average Joe flocking to Android and using it for payments." ...

    The average Joe is flocking to android. Android currently has 48% of the smartphone market share vs iOS's 19%.

    http://www.networkworld.com/news/2011/080111-canalys.html

  • Report this Comment On September 29, 2011, at 11:18 AM, kariku wrote:

    @sheldonross: The word "shipment"/"shipped" appears 10 times in that article, while the word "sold" 0 times!

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