Retailers shift their ad spending from TV, radio and print ads to digital ads.
The search giant’s mobile wallet enables consumers to pay for goods wirelessly.
Google Inc. announced today its widely anticipated plan for a wireless mobile payments system that will enable mobile loyalty, coupon and payment transactions.
Dubbed Google Wallet, and initially available on Google’s Nexus S phones on the Sprint network, the service will be free for consumers and merchants, Stephanie Tilenius, Google vice president of commerce and payments, said during a YouTube presentation. In addition to Sprint, Google has enlisted Citibank, MasterCard Inc. and First Data Corp., a payment processor, in the venture.
Google Wallet relies on Near Field Communication, a wireless technology that enables devices to exchange information—including encrypted payment card data—over a short distance. It will enable a consumer to pay for goods in a store by waving a smartphone with an NFC chip near an NFC-enabled terminal. NFC uses a merchant’s point of sale system to initiate and authorize transactions. But NFC transactions require merchants to upgrade point of sale system hardware—a big hurdle—and handset makers to embed NFC chips in mobile phones—another hurdle, though one that is being address as some handset manufacturers include the chips in their devices.
In testing now, Google Wallet will be available this summer in Portland, OR, New York and San Francisco, Tilenius says. Google Wallet will work at any of the more than 124,000 merchant locations that accept PayPass, MasterCard’s contactless payment service. Among the retail chains that accept PayPass—which until now has mostly been part of tap-to-pay credit and debit cards—are Walgreens, Macy’s, American Eagle Outfitters and The Container Store.
To tie Google Wallet to her smartphone, a consumer will either have to sign up for a Google Prepaid account or have a MasterCard-branded Citibank card that is eligible to participate in the contactless PayPass payment program, Tilenius says. First Data provides the remote authentication for the payment card data for consumers with a Citibank card. Consumers can use other payment cards to place funds into a Google Prepaid account, which Google developed for Google Wallet.
In a demonstration at Google’s New York offices, Google executive Osama Bedier, who left PayPal Inc. in January to join Google, bought a pair of shorts from American Eagle Outfitters. In one tap of his Nexus S phone on a contactless reader at a live point of sale system brought in by American Eagle Outfitters, he completed the redemption of a coupon, earned loyalty points and paid for the transaction, though he still had to sign on the screen of the POS terminal.
Google Wallet is significant because this NFC scheme is at a commercial level and not a small-scale test, says Nick Holland, senior analyst at Yankee Group Research Inc. “It’s fully baked,” Holland says. “It’s already commercial grade.”
Still, Google Wallet is not likely to be an overnight success, he says. “This will be a slow incremental value-add for the consumer, limited by the number of mobile devices with NFC capabilities and the initial low level of merchant locations equipped with reciprocal reading devices.”
Google Wallet is about more than just mobile payments, he adds. In the demonstration, for example, when Bedier searched for “denim shorts,” the lead paid ad result was a coupon for the apparel that could be transferred to Google Wallet on the smartphone and redeemed via NFC at the point of sale. Holland says Google, which makes money from consumers clicking on online advertisements, is “effectively replicating this business model, but in the physical world.”
Google eventually will charge for a click made when a consumer accepts an offer on her phone, but more details of how that will work are still in development, a person at Google says. Eventually, merchants will manage these offers online, he says.
Google plans to integrate its fledgling daily deal service, Google Offers, with Google Wallet, write Rob von Behren and Jonathan Wall, Google Wallet founding engineers, in a blog posting Thursday. Consumers will be able "to redeem (deals) via NFC at participating merchants, or by showing the barcode as you check out," the blog says.