Google flashes its new credit card app, Google Wallet


Smartphones are about to take a major swipe at plastic.

Internet search giant Google Inc. has unveiled an application that would enable consumers to use their Android smartphones to pay for products at hundreds of thousands of retail stores worldwide.

Google Wallet, set to launch this summer, is the company’s entry into the burgeoning and increasingly competitive business of turning mobile devices into digital credit cards.

Big cellphone makers, including Nokia Corp., Research in Motion Ltd. and reportedly Apple Inc., are rushing to roll out new handsets that will allow consumers to pay for groceries, subway passes and restaurant meals by simply waving their phones over a digital sensor.


Phone manufacturers and wireless carriers are jumping on the technology because it may enable them to cut in on the fast-growing world of local offers — a business that is well suited for smartphones because it lets marketers and advertisers send digital coupons to users based on where they are shopping or eating.

Google said that by 2014, it expects purchases made on mobile phones to quadruple, to nearly $630 billion. Visa and MasterCard process about $6 trillion worth of credit card transactions annually.

“We believe the shopping experience hasn’t yet been transformed by technology,” said Stephanie Tilenius, Google’s head of commerce and payments.

The new smartphones will have near-field communication, or NFC — the radio technology that allows phones to talk to credit card terminals wirelessly. Using built-in microchips, the phones can conduct digital conversations with credit card reading devices like those now found in store checkout lines. Phones with the chips will allow consumers to use coupons or loyalty cards, pay for goods and receive a digital receipt all within a few seconds.

Proponents say mobile payments may further erode the need for paper currency.

“I see this as a natural progression to replacing cash over the long term,” said Craig Ochikubo, a vice president at Broadcom Corp., the Irvine chip maker that supplies components to Apple, Google and Nokia and now makes NFC chips. “At some point we’re going to say, ‘Remember the days when we carried paper in our pocket?’”

For now, though, NFC-enabled smartphones will largely be aimed at credit- and debit-type transactions that many people are accustomed to making at supermarkets and drug stores. By next year, more than half of new smartphones should have NFC chips built in, industry officials say.


Because the exchange of potentially huge amounts of money is involved, the technology is raising security concerns. But after more than a decade of development and testing, card companies, wireless carriers and cellphone makers say wireless payments may be more secure than using credit cards.

“We think the security is actually a selling point,” said Mario Shiliashki, who is in charge of emerging payments at MasterCard. For one thing, he said, a lost credit card can go unnoticed for many hours — plenty of time for a swindler to make unauthorized transactions. “But I touch my phone 60 times a day,” Shiliashki said. “I’ll know immediately if it’s gone.”

As with plastic cards, consumers will be able to cancel digital versions right away — and replacements will arrive much more quickly. Phone thieves generally won’t be able to make purchases without a special PIN — a type of protection that doesn’t always apply to plastic credit cards. And the most sensitive credit card information will be stored in a hardware vault embedded in the phone, difficult to crack even if the phone is stolen.

Still, security researchers have stressed that, although no major vulnerabilities have yet been discovered, NFC technology may soon prove an irresistible target for cybercriminals.

“It’s going to be attacked because if money is involved, there are profits to be made by malicious people,” said Collin Mulliner, a mobile security researcher at the Technische Universitat Berlin. As with many technologies that haven’t been widely tested, he said, “the attacks will be totally different from what the designers were expecting.”

The first phone to offer Google Wallet will be the $200 Nexus S 4G from Sprint. Though only a few smartphones on the market have NFC capabilities, phone makers and observers expect that to change quickly as mobile payments catch on. NFC-enabled phones are rumored to be in development by Apple, HTC and Motorola. A number of Nokia handsets have had the capability for some time.


Google said its Wallet system would work at more than 120,000 MasterCard “PayPass” locations around the U.S. The system, developed with payment processor First Data Corp. and payment-terminal maker VeriFone Systems Inc., will initially be rolled out at stores including Subway, Macy’s, Walgreens, American Eagle and Toys R Us.