Of Special Interest

27th May 2011

Google, Citi, MasterCard, First Data mobile wallet

Google, Citi, MasterCard and First Data announced the Google Wallet, a new mobile wallet product. Potentially it could be the first electronic wallet product that might get significant take-up nationally and globally.

"Today, we've joined with leaders in the industry to build the next generation of mobile commerce," said Stephanie Tilenius, vice president, commerce and payments, Google. "With Citi, MasterCard, First Data and Sprint we're building an open commerce ecosystem that for the first time will make it possible for you to pay with an NFC wallet and redeem consumer promotions all in one tap, while shopping offline."

Google Wallet is currently in a field test and it is to be offered to customers from 'this summer'. An invitation was issued to issuing banks, payment networks, mobile carriers, handset manufacturers, point of sale systems companies and merchants to join the initiative.

The wallet used Near Field Communication (NFC) allowing payment by tapping the phone against any PayPass enabled terminal (PayPass in the MasterCard contactless payment service). Upon launch people will be able to pay using any PayPass enabled Citi MasterCard or a Google pre-paid virtual card. Google point out that a customer can use any other card or account to top up the Google virtual prepaid card.

The first release of Google Wallet will only be available on the Nexus S 4G phone using the Sprint network. Additional devices with approved NFC capabilities will follow. The phone has a secure chip, only available to authorised applications which will hold the sensitive data. There are very few mobile phone which come NFC ready currently, and most of these are Android phones, the Google operating system. NFC capability can be added to many smartphones through the insertion of a specially tailored microSD card, though some may question whether this method carries the same level of security. iPhones, which do not have a micro-SD card slot can only be converted by adding a dongle to the phone. However there are many rumours that the next iPhone to be released will include NFC capability.

"Citi's role as the lead bank in Google Wallet is the latest demonstration of how we are committed to becoming the world's digital bank, providing to customers the tools they need to manage their everyday finances with convenience and value," said Paul Galant, CEO, Citi Global Enterprise Payments. "Today's announcement and our active collaboration with Google will be looked at as the inflection point for how mobile payments are evolving from concept to mass utilization."

NFC has been under test for several years and was not widely liked until recently. For the banks the medium to long term benefit could be to get rid of checks. As well as contactless payment the system has the potential to offer P2P payments to anyone with a mobile phone or email address. Simple software could also make it much simpler to make a payment for online goods. Small ticket retailers can gain an advantage through faster checkout.

Other banks have a difficult decision to make. On the one hand there is a huge ground swell of opinion that m-commerce is 'THE BIG THING' and many have seen mobile banking take off and in some cases overtake internet banking. A scheme involving Google, is likely to gain high recognition and gain public trust through the association. However by joining with Google they could be helping establish what could be their biggest future competitor in payments and other retail banking services.

This announcement had been widely leaked for days beforehand. Whether this was an intentional leak to build interest or amazingly poor security is not known.