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Ready Money

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Hardly a week passes these days without some sort of announcement from Google. Last week it was in the realm of mobile payments, and Google took one more step in its attempt to be the dominant force in tomorrow's world. It announced its Mobile Wallet, a payment service that it is developing in the US with service provider Sprint. In simple terms, it lets you make a payment at a participating merchant store using your mobile phone. Others methods of doing this exist already, but Google has a completely different way that would provide an important alternative to operator-controlled methods widely in use in many countries.

Here is how it works. Your phone stores all your credit card information. When you check out at a participating store, you can make a payment by simply tapping your phone once on a device at the counter. Google had teamed up with Citibank, MasterCard, Sprint and First Data to test and develop the technology. It hopes to roll out the service later this summer in the US, and expand to other countries — including India — in the near future. Currently, Citibank is the sole participating bank and Sprint the only participating telecom operator. But it has an impressive list of participating merchants: Subway, Bloomingdales, RadioShack, Walgreens and many other stores that are household names in America.

To those who follow the mobile payments space, this service has some interesting aspects. First, Google combines the Wallet with Google Offers, a set of electronic coupons also stored on your phone. Availing these offers is easy and near-automatic, thereby increasing the attraction of the service to customers. Google is planning other features such as membership suggestions and digital receipts. But the standout feature, which Google is trying to sell, lies in its security. At least to outsiders, including its potential customers, the feature looks more secure than competing offerings.

To begin with, you do not display your cards like you do in a wallet. Your bank verifies your authenticity and details when you first put them on your phone, and you can de-activate them when you lose your device. It uses a technology called near-field communications (NFC), and it ensures that your data do not go out far. In competing technologies, the data goes out into the cloud. The NFC chip in the phone has several security features embedded and it is difficult for hackers to break into it.

On the flipside, it can be used now only on the Nexus 4G phones from Sprint, but it is supposed to expand to other Android phones and operators as it goes international. Yet, it would remain as an Android feature, although Google has said that it could be extended to devices such as BlackBerry and iPhone. It would be difficult, but not impossible, to use it on a phone without an NFC chip. But the real significance of the Google service, and its strength and weakness, lies in one fact: the service is controlled from the device rather than by the operator in another location. This has not been the preferred approach so far. In the UK, which is rapidly becoming the centre of mobile payments, telcos are controlling and driving the service.

Google Wallet is currently the easiest way to use mobile payments at retail merchants, where a substantial portion of credit card transactions take place. Other methods exist, but they are tied to one or other companies, whereas Wallet will work with all companies. The advent of Google Wallet would be a significant event in India.

(This story was published in Businessworld Issue Dated 13-06-2011)