Google unveils phone-based payments
The Google Wallet system will let users pay for items simply by waving their phones at cash-register readers.
Those are questions Google (GOOG) will be asking people later this summer as it rolls out Google Wallet, a new mobile payment system. Go to McDonald's (MCD), for example, and pay by waving your phone in front of special readers, like the MasterCard PayPass reader already in place at the fast-food restaurant.
There are safeguards in place so that people can't steal your phone and go on a shopping bender. The system stays shut down, for example, until you enter your PIN number at the store counter.
Post continues after this video explaining more about Google Wallet:
Google started field testing the system today, and plans to launch the service in San Francisco, Portland and New York City this summer. Google says that 300,000 merchants have agreed to use Google Wallet, including Toys 'R Us, Macy's (M) and Walgreens (WAG).
Here's how it works. First, you need a smartphone running Google's Android software. The phone also needs an NFC chip (NFC stands for Near Field Communications). Google thinks that by 2014, half of all smartphones will be NFC-enabled, ZDNet reports.
For now, Google Wallet works on the Google Nexus S 4G phone from Sprint (S).
Once you've got the right phone, you need a store with an NFC-chip reader. And that's where Google's partnership with the MasterCard PayPass system is key. So you buy your Happy Meal and whip out your phone to pay. You'll need to enter your PIN number to turn on the payment system.
Google needs big partners for this thing to work, and it has the support of MasterCard (MA), Citigroup (C) and Sprint. It also has the big-name retail partners I mentioned above.
How does Google benefit from all this? It won't charge any fees for using Google Wallet. Instead, it'll show advertising to users and heavily promote Google Offers -- its answer to daily-deal sites Groupon and Living Social.
Google Offers sends a special e-mail to users daily with a discount for a nearby restaurant or store. Users with Google Wallet just need to wave the phone at the cashier. Those who don't have Google Wallet are supposed to show their phone display to the cashier.
Google also gets another selling point for its Android smartphone platform. Maybe one day, Google Wallet will be big enough to lure iPhone or BlackBerry users. For more information, check out the Google Wallet site.
Google's announcement follows news of another mobile payment system in the works. Bank of America (BAC), Wells Fargo (WFC) and JPMorgan Chase (JPM) are partnering on a system called clearXchange that lets you send money via cellphone or e-mail, reports Karen Datko on Smart Spending. If you owe someone money, you can use clearXchange to send it straight to his or her bank account.
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