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Google's wallet becomes a reality

As expected, the long-awaited, much-anticipated, often-rumored mobile payment platform from Google Inc was announced today at an event in New York City. Google unveiled its Google Wallet, an open-source payment platform using near field communication (NFC) technologies embedded in smartphones. The new product lets consumers pay for purchases with a simple tap of their phones on point-of-sale (POS) terminals. Field tests of the product will be launching this summer in San Francisco and New York and will be rolled out nationwide later this year.

Along with the Google Wallet, Google announced Google Offers, a discount program that lets merchants send promotions and coupons directly to customers' mobile devices. The Google Offers product will be introduced this summer in New York, San Francisco and Portland, Ore.

The Google Wallet product is a partnership between Google, MasterCard Worldwide, Citigroup Inc., First Data Corp and Sprint Nextel Corp. Representatives from the four partners were on hand for the announcement to discuss the Google Wallet and what it means for the future of mobile payments.

"Today, we've joined with leaders in the industry to build the next generation of mobile commerce," Stephanie Tilenius, vice president of commerce and payments for Google, said in an announcement. Tilenius said the partner companies are "building an open commerce ecosystem" that will let consumers pay for in-store purchases using an NFC virtual wallet.

Open to all

Initially, the Google Wallet will support two payment accounts, a PayPass-eligible MasterCard account from Citi, and a new virtual Google Prepaid "card." The prepaid Google card can be funded by any account type, meaning Google Wallet customers are not obligated to open or use a Citi account.

Osama Bedier, vice president of Google's payments groups, stressed that while the Google Wallet supports Citi MasterCard accounts at the moment, the goal is to eventually open the wallet to multiple payment types.

"We want to allow the consumer to use all of the funding methods that they'd like to in their mobile wallet," Bedier said. He said the idea is to continue to partner and hopefully add every card a consumer might carry into the mobile wallet.

Additionally, Google said the Google Wallet will store not only payment methods, but also tickets, loyalty accounts, gift cards, coupons and anything else consumers currently carry in their wallets.

Bedier stressed that the Google Wallet is a completely open system and that the company is inviting other partners from the banking community, wireless carriers, merchants and handset manufacturers to participate in the Google Wallet.

"Open is who we are at Google," Bedier said. "We want it to be as open as possible so long as we don't have to sacrifice security."

Partners

While the new payment platform bears Google's name, the effort is a partnership between four companies that each fill a necessary role. As lead bank, Citi will be responsible for issuing and managing consumer accounts on the system. Payments will be routed through MasterCard's electronic transaction network. MasterCard will also facilitate purchases at the point of sale with its PayPass service, a technology that enables contactless sales.

By integrating with MasterCard, the Google Wallet gains immediate access to more than 124,000 merchants in the united States that have PayPass-ready terminals.

"MasterCard has pioneered mobile payments with our PayPass technology, and we're proud that it is at the heart of Google Wallet," said Ed McLaughlin, chief emerging payments officer, MasterCard.

Sprint is participating in the venture as the first wireless carrier to offer an NFC-ready phone. The Google Nexus S phone running Google's Android mobile operating system and containing a secure NFC chip is available to Sprint customers. Sprint CTO Fared Abib said his company is working with additional handset manufacturers to make NFC capabilities available on their devices, but he said the effort will take some time.

First Data is acting as the Trusted Services Management (TSM) agent for the platform. A TSM is responsible for provisioning payment accounts and associating them with a customer's mobile device. Additionally, First Data will be working with merchant customers of its acquiring business. First Data will be recruiting merchants to accept mobile payments.

"We're proud to play a central role in Google Wallet and to bring innovative technology such as Trusted Service Management and contactless acceptance to our clients," Ed Labry, First Data's North American president, said.

Adoption

One of the big questions about mobile payments is whether merchants and consumers will embrace the technology. Several merchants participated in Google's announcement to demonstrate that at least a few prominent merchants are ready to adopt NFC payments. Representatives from American Eagle Outfitters, The Container Store, Subway, Macy's and Walgreens spoke about their decision to participate in the Google Wallet program.

"Macy's is always looking for cutting-edge technology that will deliver value and engage our customers in personal ways," Martine Reardon, executive vice-president of marketing and advertising for Macy's, said in the announcement. "Google Wallet delivers this unique interaction across channels."

"We do see incremental sales coming from our participation in Google Wallet," John Thrailkill, VP of stores for The Container Store, said in a video shown by Google at the event.

Whether or not merchant adoption will translate into consumer adoption is yet to be seen, but MasterCard's McLaughlin said he believes the time is ripe for mobile payments. Citing a recent report released by MasterCard, he said young consumers are willing to give NFC payments a try. He also said MasterCard's research shows that consumers like the convenience of tapping to pay at a POS terminal.

"Once consumers experience tapping," McLaughlin said, "they never go back."

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