Google, MasterCard and Citigroup are reportedly working together on Near-Field Communication technology inside of Android phones to allow quick, contactless payments at 150,000 NFC-ready terminals 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' ads and discounts for mobile phone users.
The project is reportedly in its early stages, although the Google-backed system is expected to be released sometime 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."
VeriFone Systems, which makes credit card readers used widely by merchants, is also reportedly involved in the Google project for NFC-capable Android phones.
There are about 150,000 contactless NFC-based terminals already in McDonald's and DuaneReade drug stores and other locations in the US, and contactless chips are already installed in many credit cards, unbeknownst to users.
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 in an interview at International CTIA Wireless last week. MasterCard officials also held meetings, but its place in the race to offer NFC was unclear.
Wentker said the Visa trials, first announced in December, use BlackBerry and Android smartphones with special microSD cards installed. The trials also have used the 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.
NFC technology has caught the attention of many consumers, partly because the Apple iPhone 5, expected later this year, is thought to include the technology. The iPhone would be backed by Apple's enormous iTunes customer base, where every customer has already registered for song and app purchases with a credit card.
Carriers sign up
Wireless carriers have also wanted to use their networks for processing transactions behind the NFC interaction. Verizon Wireless, AT&T and T-Mobile USA last year created Isis to allow smartphone-based NFC payments using Discover Financial Services to process the payments.
At Mobile World Congress, carriers in Europe and Asia and smartphone makers, including BlackBerry-maker Research in Motion, described current efforts with NFC.
Samsung also has announced that its Galaxy S II smartphones will have NFC capability, while ZTE of China 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 that the ability to use a smartphone as a mobile wallet won't supercede the credit card or PayPal or Google Payments any time soon. That said, with so many NFC devices coming out in the next 1-2 years, "its likely this will be a big business over time, even if a relatively small percentage of users make use of the services," Gold said.