Want Google Wallet on more phones? Wait for Isis to launch

UPDATED: On the surface, you’d think that Google Wallet (s goog) would naturally run on the Galaxy Nexus, a “pure” Google phone expected to launch any day now on Verizon (s vz). But Google confirmed to the Wall Street Journal that its near field communication digital wallet will not run on its new NFC-equipped flagship phone at the request of Verizon.

Now, while this might seem like head-scratcher or a disappointment, it’s just a reminder that this is where we stand in the NFC race. Don’t expect to see Google Wallet widely distributed on a lot of other carrier phones outside of Sprint until the launch of Isis, the NFC digital payment joint venture from Verizon, AT&T (s t)and T-Mobile.

No incentive to open up

As I wrote about in my GigaOM Pro report (subscription required) last month, the Isis carriers have no incentive to let Google Wallet operate on their phones, at least until their own digital wallet platform launches next year. At that point, when the playing field is more level, that’s when you might expect Isis to open up their phones to Google Wallet. But prior to that, it could be a wait for Google Wallet to gain wider distribution.

Google’s Osama Bedier, head of payments, complained about this stalling tactic by Isis in an October interview with NFC Times, saying its “closed” approach could back fire:

“I can’t speak for those carriers, but it is not a winning strategy to try to block access anymore, although it may buy you a bit of time,” he told NFC Times. “They may try it, but it won’t last, and I hear from the carriers that they want to be open.”

Isis expected to launch in Q2 2012

Google launched its digital wallet in September with launch partners Sprint (s s), MasterCard (s ma) and Citibank (s c). But while it’s said that Visa (s v) and American Express (s axp) will now support Google Wallet, the company hasn’t been able to announce any other carrier partners or banks. Meanwhile, Isis is moving forward with plans to launch first in Salt Lake City and Austin, TX by the second quarter of 2012 before progressing to a larger nationwide roll-out. It’s gotten commitments from HTC, LG, Motorola Mobility (s mmi), RIM (s rimm), Samsung Mobile and Sony(s sne) Ericsson(s eric), who said they will all launch NFC-enabled mobile devices that use Isis’ NFC contactless technology.

Mick Mullagh, the CEO of ViVOtech, a provider of NFC hardware and software, said next year would be more of a settling period as the players in NFC payments come together and sort out how they co-exist, a process that could extend into 2013. He expects the carriers to eventually support Google Wallet on their phones but likely only after Isis is in the market and the competition is more even.

“I think mobile commerce will be open once all the players are on an equal keel and then there will be collaboration and people will compete on the value of their services,” Mullagh told me last month.

Year of confusion

This is partly why I called 2012 the year of confusion for NFC payments in my Pro Report because a lot of these business relationships still need to be worked out. Everyone wants a seat at the table and it’s unclear how everything will work together.

As more competitors compete rather collaborate, it can also create confusion for merchants and consumers, who aren’t sure which digital wallet to support and how they might work together. This could mean trouble for other NFC digital wallets that try to access the NFC secure element on new NFC-equipped phones from these Isis carriers. But ultimately, Mullagh said he expects the payment players to adopt more openness and see the benefits of collaboration, which can help everyone move faster and push broad adoption of NFC payments. There is an outside chance that Isis’ partners could extend a ban on competing NFC wallets for some time though I do agree that it makes sense for Isis to relent at some point when it’s on firmer footing.

Isis executives have played up the open nature of their digital wallet and I think consumer and merchants will also push Isis to open up and allow Google to co-exist on their phones. But as we’re seeing here with the Galaxy Nexus, they’re in no hurry. It’s unfortunate because one of the reasons I wanted to buy the Galaxy Nexus was to use Google Wallet for myself on a daily basis. I can try to get Google Wallet to work on an unlocked GSM version of Galaxy Nexus. And perhaps I will be able to sideload the Google Wallet app on to the Verizon Galaxy Nexus though I’d feel more comfortable getting Verizon’s official support. It might still happen at some point but not until this posturing gives way.

UPDATE: Verizon said today that it is not blocking Google Wallet but needs to work with Google on the application because it accesses secure hardware inside the phone. It said that commercial talks are on-going. I hope this means that Verizon will implement Google Wallet quickly. But I’ll believe it when I see it.