US shoppers soon will be able to use mobile phones to pay for things they buy at the checkout counter under a system unveiled by Google Inc and a group of banks and other companies on Thursday. Google, MasterCard, Citigroup, transaction processing company First Data and Sprint will make the service available this summer in New York and San Francisco, Google and its partners said.
The service, which competes with plans by Visa and other top US banks and mobile phone companies, is similar to how people shop in Asia, where some customers already routinely wield smartphones like credit cards. Designed to work as an app on Android phones, Google's service hitches a ride on MasterCard's "PayPass" technology, which lets shoppers tap cards for payment. Google has signed up retailers including Macy's Inc, American Eagle Outfitters Inc and Subway to blend the service with loyalty programs and discount offers.
Google plans to take a slice of revenue from another project it released on Thursday called "Google Offers." These are coupons, daily deals or discounts offered through Google searches. They also will work on mobile phones. For example, executives described how someone walking by a Macy's poster can tap on an area, triggering a coupon that shows up in the mobile wallet. That person can save the coupon for use at checkout.
The Google Wallet app is free and Google is not taking a cut of any transaction, said Stephanie Tilenius, Google's vice president of commerce. "Google's interest here 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," said Forrester Research analyst Charles Golvin.
An estimated one-fifth of people in Japan are signed up for mobile payments. In the United States, mobile payments face several hurdles, including basic hardware obstacles. Most merchants still cannot accept mobile payments. Also, the credit and debit card market is much more developed and sophisticated in the United States than in many markets abroad where more people have cellphones than credit cards or traditional bank accounts.
Unwillingness to adopt the technology has been a major obstacle too. As an incentive, Google and its retail partners will offer virtual coupons, going after turf dominated by online discount social networks Groupon and LivingSocial. Some large US companies have raced to make the technology a reality since last year. Citigroup MasterCard holders with PayPass-enabled cards will get first crack at Google's service. The Internet giant also plans to sell a virtual prepaid card similar to PayPal's online payment service.
BEATING ISIS TO THE PUNCH If the service is launched this summer as expected, it will beat rival Isis. The venture between Verizon Wireless, AT&T and T-Mobile USA has said its service would be launched early next year. Sprint was the only top US carrier that did not join the Isis venture.
Google plans to open the Wallet app to other carriers including Isis, Tilenius said. It also wants to work with other mobile phone manufacturers, including Apple and BlackBerry maker Research in Motion. Richard Clemmer, Chief Executive of NXP, Google's mobile wallet chip partner, expects that there will be at least 20 phone models on the market with NFC chips by the end of this year. The number could be as high as 40 around the world.
Visa Inc has also tested a pay-by-phone system with several large banks, including Bank of America Corp and Wells Fargo & Co. The world's largest credit and debit card processing network has said it plans to make its mobile payments system commercially available this year.