The mobile payment wars are about to heat up, with search giant Google throwing their own hat into the ring on Thursday in a move that pits them directly against credit card providers Visa, Amex and Discover -- as well as those who provide payment solutions, such as PayPal, Square and VeriFone Systems.
After months of speculation, Google finally took the wraps off their mobile-based near-field communication (NFC) payment system Thursday morning. Dubbed Google Wallet, the Mastercard PayPass-friendly service may be taking the lead with today’s announcement, but its success remains to be seen -- for now, Google Wallet is limited to trials in San Francisco and New York, with a nationwide rollout yet to come.
The long and short of near-field communication (NFC) is contactless payment -- something already built into MasterCard’s PayPass credit cards since 2005, popular with banks such as JPMorgan Chase, Bank of America, Citibank and others. This type of NFC allows you to pay simply by waving the card in front of the terminal, rather than using the traditional magnetic swipe.
NFC has been the talk of the (technology) town in recent months -- surprising considering how little traction it’s gained thus far in the United States. Google Wallet aims to change that by replacing traditional credit cards with payments made via mobile phones.
The idea isn’t a new one -- Apple has been long rumored to be working on such a concept for its iOS mobile devices, which would certainly bring it into the mainstream in a huge way. NFC was predicted for the iPad 2 back in March, but we all know how that turned out -- there’s still the iPhone 5, but that handset isn’t expected until September, which now gives Google and others a wide berth to jump in line ahead of Cupertino.
While NFC shows a lot of promise, whether it fails or succeeds has a lot to do with who gets behind it. After all, much like a credit card, there has to be some kind of financial institution behind the actual NFC transaction -- be it an actual bank account, credit card or another system, such as an iTunes account, which is widely rumored to be the method by which Apple might introduce such a technology to the world.
Payment providers aside, there’s an uphill struggle ahead on the retail end of things as well. Merchants have to incorporate NFC on top of their existing credit card payment terminals, which means additional costly hardware -- and who’s going to pay for those upgrades?
Of course, NFC isn’t the only method to handle contactless payments with a mobile device. Starbuck’s already uses a proprietary method courtesy of a free iPhone app that’s tied into their own gift cards or customer credit cards -- but the last thing customers want is to have to store a variety of apps on their handset just to be able to pay for things.
Although this concept has been slow to take off here in America, it’s already a couple years in the making overseas. Nokia teamed up with Visa to introduce contactless payments in Malaysia (of all places) back in April, 2009, with 1,800 locations where such transactions can be made with a mere swipe of the Nokia handset.
Google may have already laid the groundwork for Thursday’s announcement when it introduced the Nexus S handset back in March, an Android-powered smartphone with the necessary NFC chip already on board. Needless to say, having NFC in one out of hundreds of Android devices hasn’t quite been enough to light the spark necessary to ignite a full-on fire… until now.
Thursday morning, Google VP of Commerce Stephanie Tilenius took the stage to announce two new initiatives, teaming with carriers and banks for what she refers to as “tomorrow’s next best shopping experience.” Google Wallet promises to finally “bring together all the pieces of the ecosystem” for mobile payments. “You phone will be your wallet -- just tap, pay and save,” Tilenius announced.
Google claims that in 1998, 70 percent of consumers wouldn’t trust the internet for their financial transactions. Flash-forward to 2009, when ComScore claims that 70 percent of us now access our credit card accounts via the internet. Google Wallet aims to make that 100 percent in time, promising to finally bring NFC into the mainstream at last.
To fast-track Google Wallet’s growth, the service has teamed up with Mastercard, making the new service compatible with the existing PayPass technology. Joining Mastercard for the initial trials are Citibank and Sprint, the sole U.S. carrier for Google’s latest flagship handset, the Nexus S. By default, Google Wallet will use Citi Mastercards, but a prepaid “GCard” will enable funds to be used from any credit card you have.
Initially, Google Wallet will rear its contactless head only in San Francisco and New York, but the company promises nationwide expansion “in the coming months.” Participating retailers include Macy’s, Subway, Walgreens, Toys ‘R Us, Noah’s Bagels and “many more.”
Google didn’t stop with this morning’s Wallet introduction -- the company also introduced Google Offers, which aims to take on fledgling coupon services such as Groupon and Living Social. The service will bring a new offer each day to your email inbox, and the ability to cash in on those deals by simply tapping your phone.
The search giant has even bigger plans for Google Wallet, claiming “eventually, you’ll be able to put everything” inside the service, including your driver’s license. Folks who already don’t trust their personal data with Google will have a field day fending off this development, but for the rest of us, it appears the future is almost here at last.
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MacMike
May 26, 2011 at 12:35pm
I think you'll find a new term emerging with this introduction called "NFC hacking". Knowing there are credit card numbers being transmitted wirelessly is prime target material for hackers.
