Android phones may replace credit cards

A new Google handset can pay for items with a swipe -- just like plastic.

By InvestorPlace Nov 16, 2010 12:12PM

Credit cards © Fancy/Veer/CorbisDon't fool yourself into thinking it was fashion trends that put cargo pants and fanny packs out of business. Cell phone innovations have single-handedly made it possible to carry just about everything in a single pocket -- your address book, maps, phone, video games, music and books, to name just a few items.


And thanks to Google Inc. (GOOG) and its innovative Android operating system, your smart phone can now replace one more pesky item in your purse or pants pockets: your credit card.


That's right, the next version of Android will support a technology that allows consumers to use their handsets just like plastic to pay for a trip to the mall, movie theater or restaurant.


Google CEO Eric Schmidt gave a sneak peek at this function Monday, showing off a yet-to-be-released smart-phone handset that a shopper can tap against a reader and check out in a flash. It's a snappy feature of the new Android OS, nicknamed "gingerbread" after a long line of sweet monikers for the software that include the cupcake, doughnut, froyo and éclair.

The technical term for the tech is near-field communication, meaning that the handset will emit a very short-range signal (broadcast a foot or two, tops) that can be picked up by the appropriate receivers on merchant cash registers.


Perhaps the most interesting fact about this payment technology is that Google isn’t bothering to figure out the specifics of how it works with a ready-to-go payment app. Keeping with the open-source vibe of the software, Schmidt has left that business up to the programmers with the best ideas and execution.

"My guess is that there are going to be 500 new start-ups in the mobile payment space as these platforms emerge," Schmidt said. He added that Google would partner with traditional credit card industry players, like payment processors, rather than compete with them.

While Google is ceding ground on the app front, there’s no doubt that this could be a hallmark of the Android OS as it looks to get an edge on the already dominant mobile devices of Apple Inc. (AAPL). Steve Jobs and his iPhones and iPods have long been heavy-handed about product development, and Google’s move to welcome near-field communication apps could allow it to innovate faster and get a leg up in the mobile market.


Though near-field-communication technology has been around for years, it has never achieved widespread appeal. Google could change that if this payment tech takes off -- and next thing you know, we could see an explosion in NFC applications. Think of a fridge that knows when you're out of milk. Creepy but kind of cool.

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