Friday, May 27, 2011

Google Unveils Wireless Payment System

By punemsexesena : Google is among the first out of the gate in the attempt to make leather wallets go the way of the typewriter.

On Thursday, the technology giant introduced Google Wallet, a mobile application that will allow consumers to wave their cellphones at a retailer’s terminal to make a payment instead of pulling out a credit card. The app will also enable users to redeem special coupons and earn loyalty points.

Starting this summer, the wallet will be available on Sprint’s Nexus S 4G phone and able to hold certain Citibank-issued MasterCards. It will also hold a virtual Google Prepaid MasterCard, which can be loaded with money charged from existing plastic credit cards.

The mobile wallet will work at any of the 124,000 merchants that accept MasterCard’s PayPass terminals, which take contactless payments, and more than 300,000 merchants outside the United States. The wallet is powered by a technology called near-field communications, or N.F.C., which is incorporated into a chip in mobile phones and sends a message to the terminal sitting on merchants’ counters.

“Eventually, you will be able to put everything in your wallet,” said Stephanie Tilenius, vice president of commerce at Google, speaking at a news conference on Thursday.

But that grand vision could take a while to come to fruition. Various players have been working on mobile wallets for many years, but they have not gained traction because the companies involved have not been able to agree on how they will get paid or who will control the wallets. Mobile phone carriers, banks, credit card issuers payment networks and technology companies all have a stake in this battle.

With its wallet, Google will make money on “Google Offers” — the advertising deals from local and online businesses sent through the phone. Like Groupon, Google will collect a fee from participating retailers every time a person redeems the coupon. Citibank, meanwhile, will continue to collect the same fees as it would in a traditional credit card transaction.

It may take a little while for the Google Wallet to be fully functional across the country. While Google has partnered with more than 15 retailers, ranging from American Eagle Outfitters and Bloomingdale’s to the Container Store and Jamba Juice, they all need to upgrade their payment terminals. When they do, consumers will also be able to store and redeem special deals with the wallet. Merchants in New York and San Francisco will be ready this summer.

Once the retailers’ technology is in place, consumers will be able to walk into the retailer, and their phone will serve up a list of items they recently purchased, along with relevant discounts. Once consumers reach the checkout counter, they will be able to wave their phone, and the discounts will be applied, loyalty points will be awarded and the payment made. Google said it has been testing a variety of different offers, including a “deal of the day,” along with a $5 off check-in offer received upon entering a store.

The wallet app will require a PIN, and the payment credentials will be encrypted and stored on a chip, called the secured element, which lives inside the phone. The app itself will be free to users.

Google stressed that the wallet would work on an open platform, and invited other banks, credit card issuers, payment networks, mobile carriers and merchants to work with them.

“I expect that other payment networks and other banks will join this effort, though in some cases it will be a hedge strategy they employ along with their own mobile payment initiatives,” said Charles Golvin, an analyst with Forrester Research. “Since these payments utilize the same underlying business model as cards today, there is not significant disruption risk for these players today — the situation would be very different if other payment alternatives such as Paypal, which undercut their revenues, were being emphasized by Google.”

Google is also working with First Data, which processes payments and will serve as the wallet’s “trusted service manager,” ensuring the security of the transaction.

If the phone is stolen, the credit cards inside could be remotely disabled. Consumers would have the same “zero liability” for unauthorized transactions made with their phone as they would with their plastic cards.

Eventually, Google said its wallet would be able to hold much more than credit cards and loyalty programs. Someday, consumers will be able to pack in the contents of an entire purse, including car keys, theater tickets and airline boarding passes.

But access to all of those items will still require a fully charged phone. If the phone dies, even Ms. Tilenius of Google conceded, “I think you need to use your plastic at that point.

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