Internet search giant Google has unveiled an application that will enable consumers to use their Android smartphones to pay for products in-store, potentially boosting sales for retail businesses.
Google Wallet is a partnership between Google, Mastercard, Citigroup, First Data and Sprint. It represents the company’s entry into the increasingly competitive business of turning mobile devices into digital credit cards.
Google Wallet is built to work with the MasterCard PayPass network – a merchant point-of-sale service that enables consumers to tap to pay.
As a result, Google Wallet will immediately be accepted at more than 124,000 PayPass-enabled merchants in the United States and more than 311,000 globally.
Ed McLaughlin, MasterCard chief emerging payments officer, said in a statement the company is proud to be “at the heart” of Google Wallet.
“We’re excited to partner with these industry leaders today and committed to continuing to play a leadership role in the development of mobile payment technologies,” he said.
For retailers, Google Wallet represents an opportunity to strengthen customer relationships by offering a faster, easier shopping experience with relevant deals, promotions and loyalty rewards.
Telsyte research manager Foad Fadaghi says while he believes Google has “a lot of clout” in the mobile payments space, it will be interesting to see how Google Wallet is received.
“The key to uptake is twofold. 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,” he says.
“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.”
By 2014, Google expects purchases made on mobile phones to quadruple to nearly $630 million. Visa and MasterCard process about $6 trillion worth of credit card transactions annually.
Google vice president of commerce Stephanie Tilenius says Google Wallet is free and the company will not be taking a cut of any transaction.
“We believe the shopping experience hasn’t yet been transformed by technology,” Tilenius said in a statement.
According to Forrest Research analyst Charles Golvin, Google’s interest isn’t in the payments.
“It’s in the data that underlies the complete chain of commerce including consideration, promotion, transaction details, coupons and receipts,” he says.
The move is expected to put pressure on other companies, including Visa, to also enter the phone payment area.
Meanwhile, phone manufacturers and wireless carriers are jumping on the technology because it may enable them to tap into location-based marketing, whereby marketers and advertisers send digital coupons to users based on where they are shopping or eating.
For now, NFC-enabled smartphones are primarily aimed at credit and debit-type transactions that many people are accustomed to making at supermarkets and convenience stores.
By industry experts predict that by next year, more than half of new smartphones could contain built-in NFC chips.
NFC-enabled phones are rumored to be in development by Apple, HTC and Motorola, while a number of Nokia handsets have had the capability for some time.
