Money Watch – Personal Finance Blog

Google has today announced how it intends to get consumers to pay for goods and services using their mobile phones, with the trial launch of Google Wallet.

Google Wallet is a key part of our ongoing effort to improve shopping for both businesses and consumers. It’s aimed at making it easier for you to pay for and save on the goods you want, while giving merchants more ways to offer coupons and loyalty programs to customers, as well as bridging the gap between online and offline commerce.

Because Google Wallet is a mobile app, it will do more than a regular wallet ever could. You’ll be able to store your credit cards, offers, loyalty cards and gift cards, but without the bulk. When you tap to pay, your phone will also automatically redeem offers and earn loyalty points for you. Someday, even things like boarding passes, tickets, ID and keys could be stored in Google Wallet.

Google have teamed up with US bank Citibank and credit card provider Mastercard to give Android phone owners this quick, simple and crucially, what it hopes will be a secure way of paying for items.

When Google Wallet launches in the US, users will be able to pay from either a Citi Mastercard Credit Card, a Google pre-paid card or a gift card from certain retailers. In future they’re aiming to support all types of payment card. Google’s Pre-paid card is a “virtual” card that can be funded from any existing credit card, and for the moment, anyone activating a Google Pre-Paid card will get $10 credit courtesy of Google.

Loyalty & Offers

Of course, making the purchase is not the end of the story. Google Wallet will also store any loyalty cards you have at participating stores; when you make a purchase their, Google Wallet transmits your loyalty account information to the terminal so that you earn rewards for your purchase.

Also, Google recently launched a trial of Google Offers; which are deals on products and services at local businesses. Google Wallet will also sync these offers.

Security

In terms of security, Google Wallet makes you setup a PIN which must be used to make purchases. Your card data is stored on your phone, but in something Google calls the “Secure Element”, which is separate from the phone’s normal memory, which is the NFC technology. If your phone is lost or stolen, you will still need to call your card provider to get your cards cancelled.

Show me the money

With its Wallet, Google is attempting to close the gap that currently exists between people searching for products and services online, and then disappear off Google’s radar to buy offline. It will give them yet another layer of data from which they can sell ads (don’t forget, most of Google’s money is made selling advertising), which may be part of Google Offers. Indeed, Google are intending to integrate search with Offers, so that advertisers can promote an offer in Google’s search results which can be downloaded onto your Google Wallet to be redeemed in store.

At this stage they’re not planning on making money from the payments side of the process, which goes through Mastercard’s PayPass network.

At present, there is a lot of testing going on here. Google has decided to trial Wallet in certain cities in the US, with certain retailers and it’s currently only available on a single type of Android phone with one mobile phone carrier (Sprint). But despite its current limitations, if Google gets this right, it could take a significant chunk of payments over the next couple of years whilst other companies, such as Apple, decide on their next move into payments.