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Google announces Wallet NFC service, Offers

by Phil Hornshaw

Yup, the rumors were true: Google (GOOG) used its New York press event today to announce its new Google Wallet service, a near-field communication platform that will allow users to basically use smartphones like debit cards.

NFC technology sends a short-range signal between a mobile device and a nearby receiver so the two can exchange information. In the case of Google Wallet, the smartphone will interact with nearby payment terminals like the kind from VeriFone (PAY) that lots of retailers use for debit and credit card scanning right now. Instead of running a card and punching in numbers, however, credit card data would be stored on the phone and passed over instantly, allowing the buyer to just tap or wave their phone at the terminal to initiate a payment.

The cool thing about the service is that it should allow buyers to store multiple credit or debit cards and take advantage of a lot of different services, like loyalty cards and coupons, instantaneously. The platform will also store receipts, eliminating the need to print and carry paper ones. For sellers, Google will be able to compile a lot of data about their customers’ spending habits, which Google will translate into income through marketing rather than charging for the service.

Several companies are already involved. MasterCard (MA) and Citibank (C) have signed up with Google for the platform, as well as Sprint (S), Macy’s (M), Subway, Noah’s Bagels (BAGL) and Toys ‘R’ Us, among others. Field testing for Google Wallet is beginning right now in New York and San Francisco, and Google aims to have the platform released to the general public this summer. By 2015, Google says, 50 percent of all smartphones will be NFC-enabled, which will put the technology in the hands of about 150 million people. It’ll also be free, the company says, with Google making its money through advertising.

Google wants its Wallet platform to actually be a replacement for a physical wallet, and during the presentation said that eventually other things, like ID cards and items you’d carry there like concert tickets, will eventually be digitized with the ability to store them in the Wallet.

Google Offers looks to combine loyalty cards, check-ins

Working in tandem with Google Wallet, or maybe augmenting it, is Google Offers. The service is meant to allow users to chuck all their loyalty cards to stores that reward them for repeat business, and instead digitize those cards to use them automatically when utilizing NFC payments.

It’s all automated, but the service will allow users to tap on a specific card at checkout so they can see just what they’re loyalty card is getting them or what offers they’re receiving. Offers will also combine location-based check-in services akin to the sort of thing users already get out of services like Foursquare or Shopkick.

The idea with check-ins is that some businesses offer smartphone users special deals for using location-based services like Foursquare. Google Offers will include check-in capabilities too, so users will be able to walk into a Best Buy (BBY), for example, “check in” and share that information on social networks like Twitter and Facebook, and collect a reward such as a discount if one is offered. It can all happen automatically.

From Google’s demo, we can see that Offers will allow users to search for coupons and sales and save them to Google Wallet to use later. A coupon offer for Subway, for example, showed up in email during the demo – and it was saved quickly and easily to Wallet.

Another way users can receive coupons through Offers is from advertisements. During the press conference, a coupon was received directly from an NFC-enabled marketing poster. The poster advertised a deal and had a Google Wallet icon on it, and by tapping the smartphone against the icon, the coupon was automatically passed into Google Wallet.

In need of a new phone

Unfortunately, there are only two Android smartphones that are currently available that include NFC technology: Samsung’s (005930.KS) Google Nexus S and the Nokia (NOK) Astound. And from what we can tell right now, there won’t be upgrades to make older smartphones compatible with NFC technology, and therefore, with Google Wallet.

The Nexus S and Astound actually have NFC chips built in, so it’s physical hardware that other smartphones lack (and only the Nexus S 4G from Sprint will be supported at launch – sorry, T-Mobile customers). Future Android phones will all be NFC-enabled, though, and Google says its NXP PN65 chip, found in the Nexus S, is highly secure. The company is taking security with Google Wallet very seriously, it said during the event.

In fact, we heard a little bit about security provisions during the presentation. For instance, no card that could result in theft will ever be fully displayed on the smartphone’s screen when you use Google Wallet, which should help eliminate any theft issues from someone peeking over your shoulder.

Wallet will also include a locking feature that allows users to add a PIN code so the platform can’t be access by others if they happen to pick up your phone, and an encryption to keep hackers from plucking the signal out of the air. The PN65 chip stays switched off until Wallet is activated, so it can’t be hacked into over the air when users are just going about daily life.

Losing a phone isn’t like losing a real wallet with Google Wallet, either. All the cards are stored on the secure internal chip, so they can only be accessed with the proper PIN code. Google also has the ability to wipe cards remotely if a phone is stolen, and while the company thinks the security on the platform is pretty strong, merchants who prefer a physical signature from the buyer using Google Wallet can still request one.

Staying open

There’s a whole bunch more information on Google Wallet and stores that will accept the service at the company’s new info site, google.com/wallet. Because the service is compatible with PayPass, another tap-to-pay service, it should work with lots of retailers right at launch this summer. The Wallet site allows users to plug in their zip codes to see nearby stores that accept Google Wallet payments, and there’s a big list of companies and retailers that are already involved.

Perhaps best of all, Google isn’t closing off the Wallet service to just Android phones; any other companies who are willing to partner with Google can use the service, keeping it open to new businesses and even to other smartphone manufacturers. All it takes is a working NFC chip in a device. Google is also looking to expand the service in Europe and Asia, and is in talks with banks and credit companies there, as well.