Google's Underlying Mobile Payment NFC Strategy

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Google has introduced the next step in mobile payments: Google Wallet, an app that will make smartphones the paperless wallet tied to credit, prepaid, loyalty and coupon redemption.

The move should spur back-end integration with online display, search, and remarketing ads, as well as with automatic inventory replenishment systems for enterprises and retailers connected through Web services from SAP and Oracle.

Google will roll out Google Wallet this summer, starting with local trials in Portland, San Francisco and New York City before expanding to more. The platform, supported by Nexus S 4G through Sprint, will hold multiple cards from prepaid to credit to loyalty. American Eagle, Macy's, Subway, Walgreens, Toys R Us, and Noah's Bagels are some of the first participating retailers.

The platform relies on NXP Semiconductors' near field communication technology, a chip technology that allows the short-range wireless transmission of data from one device to another. It also relies on standards from the NFC Forum, which has been working with member companies since 2004 to bring the technology to consumers.

Google took security into consideration from the beginning. The company took the industry standard security elements from smartcard-based payments and added an over-the-air provisioning process where the bank can identify the account as the holder. Communicating a payment also required security. The chip is built with tamper sensors. If someone tries to physically crack open the chip, it self-destructs. It's also protected against laser skimming.

The platform allows consumers to clear transaction history from the History option on the main menu in Google Wallet or reset Google Wallet altogether. Along with Google Wallet, the tech company demonstrated Google Offers, deals on products and services at local or online businesses. Google also began testing other types of offers in Google products, including Google Search, Maps, Latitude, and Shopper. At participating stores, consumers show their offer to the cashier at checkout. The cashier will either scan the offer's barcode or manually or type it in.

In the fall, the platform will enable merchants to pass digital receipts from the point-of-sale system back to the consumer's phone of Google Wallet, as well as dynamically create loyalty cards.

While there are obvious applications, those a little less obvious might require companies such as SAP or Oracle to build out backend integration between enterprise retail inventory platforms and Google Wallet, relying on the NFC chips to trigger automatic inventory replenishment notifications to retailers and suppliers. The platform could also tie into search engine marketing and display ad campaigns. When stock runs out, the ads get disabled from ad networks until the inventory is replenished.

Change, however, will take more than innovative technology from banks such as Citi, that years ago became one of the first to test the tap-and-go technology that chipmakers, such as NXP Semiconductors -- a spin off of Philips Semiconductors -- designed. All of this needed Google to "transform the shopping experience."

It will take consumers to change the way they think about their phone, wallet and paying for merchandise in stores. At the Starbucks in South Coast Plaza in Costa Mesa, Calif., one of the first retail outlets to take mobile payments, a barista tells MediaPost less than 20 people daily purchase coffee with a mobile payment system.

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