The age of mobile payments may have begun, with Google shaking up the market overnight with an announcement that users of Android smartphones will soon be able to make transactions using NFC technology and an app connected to normal credit cards and Google accounts.
The announcement highlights not only the potential growth of the mobile payments space but also underlines the recent market activity, with Jack Dorsey’s start-up Square receiving funding from Visa – a company which is also trialling contactless payment solutions with iPhones in major cities across the world.
The Google Wallet program also comes after months of speculation the company was working on a contactless payments solution, along with rumours that Apple is developing something similar.
“I think they have a lot of clout in this space and this is definitely a growing strength in the mobile sector,” Telsyte research manager Foad Fadaghi says.
“Once Google starts integrating mobile wallets with NFC technology it’s quite likely we’ll see people experiment, and then use it more regularly.”
Last night Google announced at a special press conference the Google Wallet program, which is being launched in conjunction with Citi, MasterCard, First Data and Sprint. The product itself is an app, which essentially allows NFC-enabled phones to act as a wallet.
With the device, users can store credit cards, loyalty cards and gift cards, but the app will also allow users to automatically redeem offers and boards. “Even things like boarding passes, tickets, ID and keys could be stored in Google Wallet”, the company said in a statement.
Google vice president of commerce, Stephanie Tilenius, debuted the new product. “Your phone will be your wallet,” she said, “just tap, pay and save.”
Initial retailers working with the program will include Macy’s, Subway, Walgreens and Sprint. The system is currently under a trial, but a launch is expected within the next few months and more than 300,000 locations across the United States will accept NFC payments through the MasterCard PayPass system.
Other retailers include American Eagle, Foot Locker, Guess and Bloomingdale’s.
The Google Wallet app works like this – users open up the app, and then add whatever payment system they want to use. Right now, the only credit cards accepted are MasterCard and Citi cards.
But for other users, such as Visa, Google offers a “Google Prepaid” card. This connects to any other credit card and will make the transaction for you – just like PayPal.
Then, users go through a few security steps – MasterCard argues its security system is one of the most advanced in the world – and they’re ready to go. Google also argues its app is the only one that can work with multiple cards at the same time.
Then, users just have to wave their NFC-enabled phone over a PayPass reader to pay for their goods – they don’t even have to have the app open at the time.
But the app isn’t just for payments. A new feature called Google Offers, the company’s group-buying initiative, will also integrate coupons, while users will also be able to approach digital billboards and download any offers or discounts with their phone.
“We plan to aggressively enable everything a consumer would want to put in their wallet,” Google vice president of payments Osama Bedier said at the press conference.
One of the more surprising announcements of the day was that Google said it wants to partner with “anyone” who wants to add the Google Wallet system to their technology. This could potentially mean a future iteration of the iPhone with NFC could work with Google Wallet, instead of using Apple’s own rumoured solution – or perhaps the two will compete.
The retail market has already welcomed the growth of contactless payments – Woolworths even confirmed that it would take contactless card payments not one week ago – and analysts expect mobile transactions will be the next step.
This is in part due to the growth of NFC, with manufacturers including Samsung and Nokia including the contactless tech on its phones. And Google says by 2014, 150 million smartphones will be enabled with NFC providing the company plenty of room for growth.
“The key to uptake is twofold,” Fadaghi says. “First, consumers need to get on board to get people started, but the other part is the merchant side. It needs to be easy for them to take payments from customers.”
“But overall I think the market is very ripe now to have these types of services. We’ve had the technology around for many years, and the problem of carrying around small coins all day may be solved.”
Google was contacted regarding the expansion of the mobile wallet system into other countries, but no reply was received before publication.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
