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Google Wallet: How Google's To Swallow Your Real Wallet

“Your phone will be your wallet.” That’s what Google’s promising with Google Wallet and Google Offers, which’ll combine payments and deals in one neat package. And it’s a pretty compelling little vision of the future of paying for stuff.

Google Wallet isn’t really one thing, so much as a bundle things tied together in one package. It’s an Android app. It’s a way for you to pay for things with your credit or debit cards, using your phone. It’s a coupon collector and loyalty card system. It’s another way for merchants to let you pay and offer up deals. It hooks into other Google services, like Shopper (which shows you nearby deals) and Google Offers. And Google is planning for it to eventually store everything you’d keep in a wallet.

The core payment technology uses wireless NFC and more specifically, MasterCard’s PayPass system, so you’ll be able to use it anywhere that’s hooked up with PayPass, which is at a lot of retailers already. Google’s SingleTap is the extra Google-y implementation with select partners, with the full Google Wallet perks, like easily redeeming deals, loyalty credits and all of swizzle-y future of commerce stuff. (For non-SingleTap merchants using plain old PayPass, it’d be just like using a PayPass MasterCard, but with the phone instead.)

Citi’s the sole partner bank to start, while Sprint’s the carrier partner. So right now, you’d need a Nexus S 4G and a Citi MasterCard for the full Wallet experience, though you can fill up the Google Pre-paid card that comes with every wallet using any other credit or debit card. (Wallet supports having and using multiple credit & debit cards, and eventually, electronic gift cards too.)

Google says Google Wallet is “more secure than your wallet”, because your credit card is never fully displayed, it requires a PIN to access, and the card data is encrypted. You can lock Wallet, which is a little more difficult with a worn leather billfold. If you lose it, the cards can be de-provisioned over the air. There’s a fair bit of security built into the phone’s NFC chip, which is what stores and transmits credit card information. The NFC antenna is turned off when the screen off, so it can’t be scraped, and the secure element is only turned on when the wallet is unlocked and enabled for payment. Defences against “laser attacks” (for reals) and other anti-tampering is baked into the chip. Card data is provisioned securely “all the way through”, from the bank to the phone, to the chip. When you first add a card to Wallet to provision it, the info’s verified by the bank-that you’re an authorised user and the like – and then that data’s sent to a trusted services manager who’s “uniquely qualified through secure keys” to access it. And there’s a $US100 limit until everything’s activated via SMS or email. Privacy is whole ‘nother set of issues, though.

If you don’t have a phone with an NFC chip, it’s obviously gonna be hard to pay using an NFC system. Which doesn’t leave you with a lot of choices for phones. Google says that they’re going to “move all future Android phones to the NFC standard” and “everyone’s jumping on the bandwagon”, in terms of partner carriers and phonemakers. (Sprint and Motorola just sent out invites for a joint event, so expect another Wallet phone, like soon.) As for non-NFC Android phones, Google mentioned using an NFC sticker, though that’s obviously not gonna have the security features that the full-blown chip has. And what about Wallet on non-Android phones, like iOS and Windows Phone? Google says they’ll work with “everyone”. The question is whether “everyone” will work with them.

Field tests of Google Wallet kick off today in New York and San Francisco; the product comes out this (northern) summer. It’s totally free, for users and merchants. The SingleTap ecosystem is something that Google plans on building out in a serious way, already promising digital receipts, a la Square, and ability to dynamically create membership cards – if you go to Peet’s (or a better coffee shop) a lot, Wallet will suggest you create a membership card. Gaming elements might play a part later (like Foursquare). Google wants to “aggressively enable” anything a consumer would want in their wallet. (Is that scary? Maybe.)

Separately, there’s Google Offers, which’ll deliver deals to your inbox everyday. Offers are designed to easily redeemable with Google Wallet – you can save coupons to your wallet, whether it’s a Google Offer you see on the internet, or passing an NFC-enabled poster offering 15 per cent off a pair of jeans. In one of the demos, Google Shopper tapped into Offers and Wallet, showing nearby deals, which you could save into Wallet. Offers is how Google is gonna make money off of this whole enterprise, “like Groupon”, since they’re not making money off of payments themselves-they want to build the ecosystem and get people using Offers, where they pull in ad revenue.

Google’s pretty vocal that this is just the first step, a ways away from taking over the world. It’s limited to the Nexus S, Mastercard, Citi and Sprint. And a medium-sized selection of retailers. But what they’re trying to do is compelling, finally delivering the future of payments we’ve all imagined for years. The end of physical credit cards, coupons, signatures, maybe even cash, eventually. Completely digital, literally frictionless transactions, for anything. Wonderful, logical, scary. [Google Wallet, Google Offers]

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