Google moves forward with mobile wallet

The Internet has been abuzz with talks of NFC and the future of the mobile wallet, and today Google announced a partnership that may take this buzz into the realm of reality. Sources close to the WSJ said, Google Inc. announced a partnership with MasterCard Inc. and Citigroup Inc. to embed technology into Android mobile phones that would allow customers to make purchase by waiving their smartphones over a special reader embedded into POS systems.

Google has already embedded the “near field communication” payment chip into its Nexus-S, but the company failed to prompt widespread pickup and use of the technology. Perhaps by partnering with the two financial icons, Google can sway retailers and consumers to adopt the technology. The plan is to offer retailers more data about their customers to create targeted ads and special discounts for mobile users. Consumers can also track spending through their mobile wallet.

Consumers would have to download a mobile-payment application in order to use their Citigroup-issued debit or credit card for electronic payment. Perhaps further down the line, Google will have the application preloaded on new Android phones.

The plan involves VeriFone Systems Inc., a company which makes credit-card readers for cash registers. VeriFone would have to roll out more contact-less devices throughout stores to enable the swipe or wave feature Google is hoping to implement. The credit card readers are based on NFC technology, which are already embedded within the cash registers of thousands of merchants nationwide.

“A phone is a lot smarter than a card,” said Doug Bergeron, VeriFone’s chief executive, in an interview with the Wall Street Journal. “It opens the door to a rich experience at the point of sale that retailers really covet.”

The question on everybody’s minds is, “exactly how secure if NFC?”

“Because it’s contact-less there’s a perception people can grab it from thin air, but it’s actually a more sophisticated technology than credit cards with a magnetic stripe, making it more difficult to steal a consumer’s payment information,” said Nick Holland, a mobile-transactions analyst at Yankee Group.

Although payment information may be hidden, this would not stop a thief from swiping your credit card if you happen to misplace your cell phone. Combine that with Google’s promise to retailers to obtain customer and buying information for more targeted ads, and an instant red privacy flag goes up.

The system is expected to be released this year by Google, the company hoping to broaden uses of the smartphone, which may help put the telecom ahead of main competitor, Apple.

Verizon Wireless, AT&T Inc., and T-Mobile USA announced last fall they would work together on a project called “Isis,” to enable customers to pay for goods using their smartphones, ultimately eliminating the reason to carry a wallet at all.

The market for mobile payments is growing significantly, with numbers around $618 billion by 2016, cited a report by MasterCard and consulting firm Edgar, Dunn & Co. Expect NFC and the mobile wallet to continue to grow in the coming years as more retailers, telecoms, and credit card companies continue to adopt the program.