Google takes command of m-commerce race with digital wallet launch

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Google (NASDAQ:GOOG) officially launched its much-anticipated Near Field Communications-based contactless payment platform Thursday, announcing it will align with U.S. network partner Sprint (NYSE:S) and financial services providers MasterCard, Citi and First Data to enable subscribers to purchase goods and redeem coupons and loyalty rewards via Android smartphones.

"Our goal is to bring together all the pieces of the ecosystem and drive a great, brand new shopping experience for everyone," said Google Vice President of Commerce Stephanie Tilenius during Thursday's launch event. "Your phone will be your wallet--just tap, pay and save."

Comprising two complementary applications--Google Wallet and Google Offers--the m-commerce solution promises an open ecosystem, with Google planning to develop APIs supporting integration with multiple partners. "We want to invite banks, carriers, merchants and POS system providers to help bring about these richer experiences," said Google Vice President of Payments Osama Bedier. For now, payments are limited to Sprint's Nexus S 4G smartphone, although Google plans to expand the service to additional devices in the near future.

Google Wallet is presently in field tests in New York City and San Francisco, and is slated to roll out to additional markets in the coming weeks. At launch, it will support both Citi MasterCard and a Google Prepaid Card, which consumers may fund with almost any payment card. Google states that consumers can provision their card to their phone in seconds--the user submits the account data to the card's issuing bank, which verifies the information with First Data, which then authorizes the phone for payment use. Google stresses that the Nexus S 4G also includes the NXP PN65 chip, the same security technology embedded into contactless credit cards and passports and touts safeguards like tamper sensors--moreover, the chip is activated only when the wallet is manually unlocked, guaranteeing against misuse. 

Retail partners committing to Google Wallet include Subway, Walgreens, Toys R Us and Macy's. "This is not just an announcement, this is a real product," Bedier said. "It's up and running, and merchants are integrating it as we speak." According to MasterCard Chief Emerging Payments Officer Ed McLaughlin, a Google Wallet-enabled device will work anywhere the merchant services provider's PayPass contactless payment terminals are available--over 300,000 retail locations worldwide, with about 100,000 of them in the U.S.Google Ecosystem

Google Offers expands the platform beyond purchases. The application enables consumers to store coupons, loyalty cards and gift cards within their phone--when users tap to pay, the device will automatically redeem offers and earn loyalty points. Google adds that it hopes to eventually expand the solution to boarding passes, event tickets, ID cards and keys.

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"Google's statement that mobile payments are just getting started is correct--today's announcement is another early salvo in what will be a long and hard-fought battle to change consumers' payment behavior and, as a potential result, the makeup of the payments landscape," said Forrester Research analyst Charles Golvin. "But 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."

Google first introduced support for proximity-based NFC capabilities with Android 2.3.3, released in February 2011. That same month, then-Google CEO Eric Schmidt called mobile payment services and NFC transaction technologies a "mega-scale opportunity." Earlier this month at its annual I/O developer conference, Google said it has now activated more than 100 million Android devices worldwide and adds 400,000 new activations every day, up from 100,000 daily activations a year ago.

A survey published by MasterCard last week indicates that 62 percent of U.S. mobile subscribers are open to making purchases using their phones. Respondents between the ages of 18 and 34 are driving interest in m-commerce, with 63 percent stating they would be at ease making mobile-enabled purchases, compared to 37 percent of respondents 37 and older--in addition, 65 percent of users between 18 and 34 say they feel more naked without their phones than without their wallets, compared to 34 percent of those 35 and up.

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