Google wants to give smartphone credit
NEW YORK – Google Inc. is trying to nudge consumers and merchants into a world where the smartphone has replaced the wallet as the container for credit cards, coupons and receipts.
In Google’s vision detailed Thursday, shoppers will touch their phone screen to select a card, then tap the phone to a credit-card reader in a store or restaurant. Google would make money by selling coupons and advertising that come along with the experience.
It’s a goal shared by others. The Internet search and advertising company faces tough competition from cellphone companies, payment card issuer Visa Inc., eBay Inc.’s PayPal payment service and others. All of them want to play the central role of tying together phones, retailers and banks into a new payment system.
Google views its digital wallet as a way to sell advertising at a pivotal moment: when shoppers are in stores, ready to spend money and even more receptive to coupons and other discount offers.
Nick Holland, an analyst at Yankee Group, said that although all parties stand to benefit from Google’s system, Google itself has the most to gain. That’s because the Google Wallet would allow the company to “own” the market for advertising that’s tied to the user’s location.
Google said it’s launching a Google Wallet trial in San Francisco and New York in cooperation with MasterCard and Citibank. It will open up the system to consumers later in the summer. It then plans to expand across the country.
There has been talk of smart payment systems for years, and Google faces the same hurdles that have stifled previous trials.
One is that Google Wallet will initially work on only one smartphone, the Google Nexus S 4G carried by Sprint Nextel Corp. Several smartphone makers, including Research In Motion Ltd., maker of the BlackBerry, are ready to bring out more phones with chips for so-called Near-Field Communications, but it’s uncertain if they’ll work with Google’s system.
Another hurdle is getting retailers to invest in terminals that can talk to the phones. Google Wallet will connect only to MasterCard PayPass terminals. There are more than 135,000 of those in U.S. stores and restaurants, but that’s only a small fraction of the total number.
Google’s carrot is that retailers will be able to put loyalty cards and coupons in the Wallet, helping them track and engage with their customers. Partners in the trial include Macy’s, RadioShack, Subway, Toys R Us, Duane Reade and Walgreens.
The final obstacle is persuading consumers to take the leap. Phones might one day offer slightly faster checkouts, but the benefit would be small. “Consumers and businesses don’t have a compelling need for changes in payment methods,” a recent study by the Federal Reserve said. It nevertheless concluded that there are substantial benefits to reap for everyone involved if mobile payments become a reality.
One of the potential benefits is increased security compared to cards with magnetic stripes, which can be copied surreptitiously.