March 28, 2011

Google Working To Develop Mobile Payment Technology

Google wants to transform Android phones into a kind of electronic wallet that will allow consumers to make purchases by waving their smartphones in front of a small reader at checkout. MasterCard Inc. and Citigroup Inc. have teamed up with the Internet giant to help develop this technology, reports the Wall Street Journal.

Google's motive is to boost its advertising business to local retailers. The company is not expecting a cut from the transaction fees. It hopes the technology will potentially attract new consumers through ads or offers. Retailers are able to instantly see results and then collect data about their customers for future marketing efforts, WSJ reports people familiar with the matter as saying.

A local media advisory firm, BIA/Kelsey, estimates that small and medium-sized businesses with less than 100 employees are spending $35 billion to $40 billion, collectively, on local advertising in the U.S. in 2009.

"By helping facilitate transactions and redemptions of coupons and discounts, [Google] may also be able to gain insight into consumer-spending behavior, said a person familiar with the matter."

Naturally, privacy concerns are raised with the new technology.

"Because it's contact-less there's a perception people can grab it from thin air, but it's actually a more sophisticated technology than credit cards with magnetic stripe, making it more difficult to steal a consumer's payment information," says Nick Holland, a Yankee Group mobile transactions analyst.

Google's new payment system would not put consumers at any greater financial risk. Any unauthorized purchases would still be covered by the card companies.

Verifone chief executive  Doug Bergeron says, "A phone is a lot smarter than a card. It opens the door to a rich experience at the point of sale that retailers really covet."

MasterCard sponsored a report by consulting firm Edgar, Dunn & Co. that stated the "the market for mobile payments is expected to grow significantly in the next several years, reaching $618 billion by 2016."

In a report, the Federal Reserve estimated there are at least 70 million contact-less devices that included debit and credit cards; and that 150,000 contact readers were installed by merchants in the U.S., reports WSJ.

MasterCard and Visa Inc. are currently testing pilot mobile and contact-less payment plans that allow consumers to make payments with existing smartphones that are equipped with a special chip and antenna, reports WSJ.

Bergeron believes that Apple will incorporate the NFC technology in future iPhones.

Research in Motion Ltd., maker of BlackBerry, said that it would support NFC in its future phones.

If successful, Google's program with MasterCard and Citigroup has the potential to expand to other card issuers and networks.

Wal-Mart Stores Inc. representative have confirmed their meeting with Google about the technology, but it was only preliminary. There has yet to be plans for adoption, reports WSJ.


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