May 26th, 2011

We just got done watching the live stream of Google announcing Google Wallet and Google Offers in conjunction with Sprint, FirstData, Citi and Mastercard. It’s everything we imagined it to be and more. Using an NFC phone, you’ll soon be able to tap POS systems to quickly and securely make payments without the need to carry around any more plastic other than what may have been used to construct your phone.

It’s so much more than just payments, though. Google also announced Google Offers, a companion service which enables retailers to deliver offers to their customers handsets, and which enables customers to easily redeem them using that same handset.

All of the partners mentioned above convened in New York to show off the new technology that Google is set to launch this Summer. They detailed everything – from how the NFC chip securely stores and handles the data to how you’ll actually use the applications on your Android phones.

How it’ll work

In the demo, setting up Google Wallet looked very simple. From the start, you’re asked to enter a pin number that will be used to access Google Wallet every time you open the application. After you’re in, you’re asked to add a credit card. You do just that, entering your credit card information into a series of text fields just as you would any website online or any mobile payments form.

Upon entering your details, three things happen. First, your bank verifies that you are who you say you are as they securely receive your request and details. Once they do, they securely send that information to FirstData, who is a “trusted services manager”. They see that the bank has given them the green light as far as authentication goes.

After that, FirstData sends a token back to your device saying it’s OK for you to use your wallet on your phone. It sounds like a long process, but it happens in seconds. After that, you can start buying stuff but you can only use $100 until you activate/verify your account to use that card. (Usually done through email.)

If you don’t want to use multiple credit cards on the same phone, or if you don’t have a Citi Mastercard, you can add funds to a “GCard” that is usable just like a regular card at any supported point of sale.

Google, in conjunction with FastData, has taken security very seriously in the venture and have gone above and beyond industry standards to ensure the utmost safety for consumers and their partners with innovative hardware and software-based solutions. Do not try to open your Nexus S or any phone with NXP’s secure chip inside – your NFC chip will purposely break. And that part of the NFC chip won’t even be powered on until you enter the NFC wallet application and submit your pin number.

What you can do with it

After that, you’ll be able to walk into any enabled retailer and use your phone to make purchases just as you would with a credit card. Going further, Google Offers will enable you to take advantage of deals that your favorite retailers are offering. You can search Google for, say, a bicycle and find that a bicycle shop has a 20% off coupon. Simply click “save to wallet” and it’ll be there on your phone to redeem at the point of sale.

Things get really cool where you can send multiple coupons and cards through one tap. Google calls this SingleTap and will make it easier and quicker for you to take advantage of all of the offers you can and pay for your goods. No longer will you have to fish for that coupon, scan your rewards card, then swipe your credit card. All of that can be sent to the point of sale in one fell swoop.

It’s a two-way system, as well. A merchant can automatically detect if you’ve been shopping at their store a lot and can set you up with a rewards account and card that is stored on your phone right away at the point of sale. And you don’t have to remember that punch card or rewards card when you go to buy more coffee – just keep buying with your phone and you’ll eventually unlock that free cup of java. Gift cards will also be supported in a similar way as regular credit cards.

What the future holds

And it doesn’t stop here, apparently. Google’s looking to add many other things to the system in the future, such as giving merchants the ability to send receipts to your phone instead of having to print paper.

One use case that immediately popped into my head was McDonalds Monopoly. It comes around every year and you’re bound to lose those tiny pieces that come with your meals. McDonalds could send your game piece to your phone right when you buy the meal so that you don’t have to deal with keeping track of those little buggers.

Other use cases include storing tickets to a movie, concert or sporting event and being granted admission by tapping your phone at a node.

There are probably a lot more things that could be done with it that I can’t even think of at the moment. This type of functionality will be possible due to the vast open nature of the platform. In their press briefing, Google stressed that being open, flexible and inviting was the only way they would consider going about this movement.

When, where and with whom all of this is happening

The service is being made free so that even the smallest of shoppes can accept Google Wallet and Google Offers. It’s a great strategic move by Google that should position them well in this space up against competition ISIS (who is currently collaborating with carriers Verizon, T-Mobile and AT&T on their own solution). Sprint is the only American carrier who has partnered with Google on this venture.

Google’s inviting anyone and everyone to jump on board, including carriers, merchants, credit card providers/banks and more. They’re running trials in San Francisco starting this stummer, and will eventually expand the service nationwide in the months to come. Merchant partners include Subway, American Eagle Outfitters, Macy’s, Walgreens, Toys R Us, Noah’s Bengals and a lot more to start.

You’ll be able to use it at any PayPass-enabled point of sale system, and you can only use Wallet with a Citi Mastercard at this time. Google is working on adding more credit card providers and banks in the future. In the meantime, those without Citi Mastercard can add funds from any credit card to the “GCard” detailed above. Google has stated that, starting out, over 120,000 merchant locations will be enabled with this technology in the United States and over 300,000 locations will be enabled worldwide, with more to come after launch.

Google says they don’t expect this to become as common as credit cards for quite some time. And if you don’t have a Nexus S, don’t worry – Google’s expecting 50% of all smartphones to be NFC-enabled by 2014. Head over to Google.com/wallet for more information.

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