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Google Wallet Could Transform Mobile Payments


After heavy speculation this week — and even over the past year — Google is teaming up with some heavy hitters in credit cards and mobile phones to launch the long-awaited Google Wallet.

Citigroup, MasterCard, First Data, and Sprint Nextel joined Google in its New York offices Thursday to offer the press an official demo of a Google app that essentially works to transform a smartphone into a wallet. The demo showed how consumers can tap, pay and save using a phone and Near Field Communication (NFC). Google Wallet is currently in field testing, with no official release date.

"Google Wallet is a key part of our ongoing effort to improve shopping for both businesses and consumers," Rob von Behren and Jonathan Wall, the founding engineers for Google Wallet, wrote in a blog. "It's aimed at making it easier for you to pay for and save on the goods you want, while giving merchants more ways to offer coupons and loyalty programs to customers, as well as bridging the gap between online and off-line commerce."

More Than a Wallet

Google Wallet will initially support both Citi MasterCard and a Google Prepaid Card. But Google said consumers can fund the prepaid card with almost any credit card. In practice, consumers can tap their phone to pay wherever MasterCard PayPass is accepted. Google Wallet will also sync a consumer's Google Offers account, which can be redeemed via NFC at SingleTap merchant venues or by showing the bar code to a cashier at checkout.

Google Offers is a beta service that competes with Groupon. The city-specific service offers deals on products and services. Although the number of participating merchants is limited at launch, Google said many merchants are working to integrate their offers and loyalty programs with Google Wallet.

"Because Google Wallet is a mobile app, it will do more than a regular wallet ever could. You'll be able to store your credit cards, offers, loyalty cards, and gift cards, but without the bulk," von Behren and Wall wrote. "When you tap to pay, your phone will also automatically redeem offers and earn loyalty points for you. Someday, even things like boarding passes, tickets, IDs and keys could be stored in Google Wallet."

Accelerating Development

Like most everything else it does, Google said it's building an open commerce ecosystem around Google Wallet. The company is planning to develop APIs that will allow integration with partners. At launch, Google Wallet will only be compatible with the Nexus S 4G by Google smartphone, which is exclusively available on Sprint.

"Google Wallet with its myriad promotional and loyalty capabilities is very powerful for merchants, advertisers and consumers. One question is how many consumers will be able to use the system in the near term?" asked Greg Sterling, principal analyst at Sterling Market Intelligence.

"It appears that there's a substantial installed base of merchants — approximately 100,000 — that are ready for the system, but it could take several years for this to become mainstream. However, the announcement today will do for mobile payments what the iPhone did for smartphones: Dramatically accelerate the development of the market."

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