Tap to Pay with Google Wallet?

Category: Finance , Mobile

I was just in Macy's and saw a sign at the checkout, inviting me to pay with Google Wallet, by tapping my smartphone on the credit card reader. It also said something about NFC, which I don't understand. Can you tell me more about this, and how it works?

How Can I Use Google Wallet with NFC?

Google Wallet is a mobile payment system that allows users to make point-of-sale payments via their smartphones, using a variety of payment methods. Google Wallet can store information about a user's debit or credit cards, gift cards, loyalty cards, and even digital coupons or promotional offers. Payments are made by tapping a smartphone against a compatible reader, or just waving the phone very close to the reader.

Google Wallet is more secure than a leather wallet full of plastic cards, supposedly. All data is stored on a special encrypted chip; credit card numbers, in contrast, are embossed in bold characters across the faces of cards. The magic that makes "tap to pay" work is called NFC (near-field communications). It's a wireless technology that allows the Wallet app on your phone (and other NFC devices) to communicate with the reader. You may have seen this already, at gas stations and convenience stores that allow you to pay with NFC tags that hang on your keychain.
Google Wallet and NFC

NFC works only over a very short distance, so it should be impossible for nearby hackers to eavesdrop on the transactions between your phone and the reader. Google also emphasizes that "the smartphone never leaves the user's hand," although that makes it hard to explain the hundreds of thousands of phones lost every year. (See my related article on How To Track or Locate a Cell Phone.) But you needn't worry too much having your funds looted if you lose your phone. At the point of purchase, customers must enter their Google Wallet PIN code to prevent unauthorized payments. In that respect, it's safer than credit cards, which CAN be used if you lose your wallet.

In order for a mobile payment system to work, merchants have to install compatible readers. Google has recruited several retail heavyweights including American Eagle Outfitters, Bloomingdales, Foot Locker, Jamba Juice, Macy's, RadioShack, Subway, The Container Store, Toys "R" Us, and Walgreens. Additionally, Google Wallet will work with any of about 300,000 MasterCard PayPass terminals, and VISA has licensed its mobile payment system to Google.

Sounds Great! Where Do I Sign Up?

Google gives new users a $10 credit when signing up for the Wallet service. But don't get too excited about making payments with a tap of your smartphone, just yet. Currently, the only payment cards that work with Google Wallet are the Citi MasterCard and a Google Prepaid Card. However, the latter can be loaded with cash from other payment cards. To use Google Wallet in retail locations, you must have an Android phone with the NFC feature, and you must be on the Sprint network. And as of now, the only Sprint phone that supports the Wallet app is the Nexus S 4G model.

Google won't charge consumers or merchants for using Google Wallet. Instead, it will rely on its traditional revenue source: targeted ads. Yes, based upon your purchases and location, Google Wallet will "suggest" nearby merchants offering limited-time promotions. For example, upon walking into Macy's you might see a coupon or special offer appear on your phone. I'd almost rather pay a fee for Google Wallet, than deal with unsolicited coupons popping up while I walk around the mall.

The mobile payments arena is pretty confusing right now, with competing alternatives, and rumors of back-room deals and secret handshakes circulating. As I mentioned earlier, Sprint is on the leading edge, in terms of offering NFC payments. Verizon, has hinted that Google Wallet will not be allowed on its smartphones. Although they cite concerns with the Wallet security architecture, the real reason is probably that Verizon is developing its own mobile payment system, called Isis, in partnership with AT&T and T-mobile. So Google will have to negotiate with the mobile carriers, who want a slice of the NFC pie.

Paypal is also getting into the mobile game. VISA is also developing its own mobile payment system, and even Starbucks has a mobile payment app. So it looks like it will be some time before you can expect your smartphone to perform the "tap and pay" magic trick reliably, across a wide spectrum of merchants and carriers.

Have you used NFC to make payments? Does this technology worry you? Post your comment or question below...

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Most recent comments on "Tap to Pay with Google Wallet?"

Posted by:

12 Dec 2011

I used to live in Japan from 1987~2007 and in late 2005, Sony came out with the Edy an NFC system. I used a card that you could pre-load with up to 20,000 yen. You could use them at McDonalds and a few other stores. You could also use them on some vending machines, great if the machine ran out of coins to give you change, or if you only have 10,000 yen notes. Then later, in early 2006, Suica came out and for that you had to use a credit card to activate it and that capability was in my phone. For the Edy card, if you lost it, you could lose upto 20,000 yen and anyone could use it. This was especially good at PokePark that ran for 3 months in Nagoya which coincided with the Expo. With Suica, you could buy train tickets or run through gate with a swipe of your phone, but you had to enter a password to use it, but if you did that while waiting in line, you could just go through and you would be charged. Basically, this technology seems new in the US but this is now old technology. Sure since 2006 it is only 5 years old but in technology, it is old (Vista had not yet come out). I was particularly excited when our building allowed us to load the security card onto the phone so that we could enter the office with the phone. Security with the phone and the NFC technology, was mitigated in that you need to unlock the phone to get the Edy or Suica or building access. Without unlocking your phone, none of that would work. So, if I lost my phone, I wouldn't have to worry, since it would still be password protected. So, I feel that Google Wallet needs to have a prepaid version which would probably make it safer in that you stand to loose just a bit of money as opposed to having your credit card exposed. You actually had to touch you phone or card to the reader, just a hair off and it wouldn't register. Also, the reader and the phone make a sound when you use Edy or Suica. Of course cards, not phones, would not make any sound so you don't know if someone read it. For phones, it would be good if it play a sound when scanned, so you would know if someone just scanned your device. When I bought my Vaio, it came with an Edy reader/writer. So I could use my credit card to load my Edy.

Posted by:

John Burrows
12 Dec 2011

This appears to be a great opportunity to invest in emerging technology. NXP Semiconductors is supplying the chips for Sprint phones. Will other flavors of mobile payments also use NFC? Are there other companies that may benefit from this trend?

Posted by:

13 Dec 2011

Hi Bob,

I have a question. How can i limit the bandwidth on a particular desktop and get full bandwidth on my laptop. I want the desktop which is used by the kids to consume less bandwidth so that my work don't get affected.

Can you please suggest.


Posted by:

13 Dec 2011

How secure is this system if your smartphone gets lost or stolen? Can that be just as devastating as losing your wallet full of plastic?

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