Google has reportedly joined forces with MasterCard and Citigroup to roll out Android phone with Near-Field Communication (NFC) technology to allow quick, contact-less payments at 150,000 retail outlets in the US.
According to unnamed sources quoted by the Wall Street Journal, Google would not collect a portion of transaction fees, opting instead to use purchasing data from customers to target retailers' adverts and discounts for mobile phone users.
The project is reportedly in its early stages, although the Google-backed system is expected to be released some time this year. Citigroup would allow its debit and credit card customers to pay for purchases at train stations and retail shops using an app on various Android phones enabled by an NFC radio chip inside the phone.
Google's interest in NFC - combined with other announcements involving Visa and American Express - show that NFC "is the new holy grail for...credit card issuers who see the hundreds of millions of smartphone devices being equipped with the technology as ripe for the picking," said Jack Gold, analyst at J. Gold Associates. "No one wants to be left behind."
NFC allows mobile phone users to pay for goods and services by simply waving their handset across a special contactless reader in a store.
MasterCard declined to comment on the report, although Ed McLaughlin, chief emerging payments officer for the company, said: "We are pleased to see great interest in NFC technology. It is a very high priority at MasterCard and we think that 2011 will be the year of mobile payments."
A phone with an NFC chip installed or added through a special case would allow an application to be layered on over the NFC capability, even allowing person-to-person payments between two capable phones in close proximity, said Dave Wentker, senior leader of mobile product development at Visa.
Visa is working on four pilot NFC projects in San Francisco and New York with US Bank, Wells Fargo, Bank of America and Chase, Wentker said.
Wentker added that the Visa trials, first announced in December, use BlackBerry and Android smartphones with special microSD cards installed. The trials have also used the Apple iPhone 4 with a special case that switches the NFC antenna on and off.
Wentker said security is not seen as a major concern with NFC, partly because banks offer refunds for fraudulent payments, but also because the smartphone apps that use the NFC chips require passing the smartphone over a reader close by within 20 to 30 seconds of activation.
Samsung announced that its Galaxy S II smartphones will have NFC capability, while ZTE will be adding NFC chips to its mobile phones before July.
Juniper Research recently said there are about 10 million phones with NFC today, a number that will reach more than 450 million by 2015.
Gold said the ability to use a smartphone as a mobile wallet won't supercede the credit card, PayPal or Google Payments any time soon. That said, with so many NFC devices coming out in the next 1 to 2 years, "it's likely this will be a big business over time, even if a relatively small percentage of users make use of the services," Gold said.