Years ago I met with an NFC technology company that promised me that, someday, NFC chips would be in phones and we'd be paying with them instead of using old-fashioned credit cards. Back then, France already had NFC-enabled phones. Unfortunately, it took years for the technology to reach U.S. phones and, apparently, Google to figure out how to make a system that could replace not one, but potentially all the credit cards (and rewards cards) in your wallet.
Google's announcement today was as everyone expected an official unveiling of its NFC-based Google Wallet payment system. (You can check out our step-by-step run-through of the system here.) The addition of Google Offers was somewhat less expected and probably not exactly welcomed by daily-deal competitors Groupon and LivingSocial.
The Internet giant appears to have thought of everything. This in-phone system will not only work with a select set of Citibank MasterCard credit cards, but with the use of the built-in, prepaid Google card, it'll let you add funds from virtually any credit card (but you'll use the Google Card to pay). Paying with an NFC-enabled phone (which Google optimistically says will account for 15% of the mobile phones on the market by the summer) is pretty much like paying with any of the tap-and-go credit cards and fobs you've used in the past.
When I looked at NFC years ago and in most of the years since, the biggest question has always been security. By definition, NFC or "Near Field Communication" only works if you are millimeters away from the corresponding transceiver. Still, many consumers I've spoken to have expressed concern about the ability of hackers to brush by you and either charge on your cards or pick up your credit card info.
During the Google Wallet rollout, Google made clear that nothing is more important to them than the security of this new commerce ecosystem. Well, except for openness. That's right; this is an open, free system. Now, Open and Secure seems like a perfect oxymoron, but Google insisted that it'll make sure it's "open as possible as long as we do not sacrifice choice or security." Fair enough. I do think that Google stressed "open" as a way to attract more partners beyond the formidable likes of Citibank, MasterCard, Subway and Walgreens. On the other hand, will credit card competitors and currently not-a-partner Visa see it the same way? Or perhaps we'll be seeing another mobile payment system from Visa and, maybe, Microsoft or, much more likely Apple.
What if during the upcoming Apple World Wide Developer Conference, Apple's Steve Jobs stands on stage with an iPhone 4s and announces integrated NFC support and welcomes its new commerce partner Visa? What happens to Google's open plan then? Nothing really, but we will end up with competing mobile phone payment, ecommerce and rewards plans.
This somehow seems more than likely.
Getting back to what Google unveiled here, I was impressed with its security plans, which includes a PIN number for the Wallet. Google, though, answered the concern about someone slurping your NFC data by turning off the NFC chip when the phone's screen is dark (as it often is when it's in your pocket) and the addition of a smart card reader chip that talks to the trusted partner First Data, the company that actually processes the transaction data. That chip will self-destruct if someone tries to hack or crack it. Sounds pretty good.
What Google didn't say is which phones beyond Sprint's Nexus S 4G, will have the combination of these two chips. Speaking of Sprint, it is interesting that with the heavy focus on open, Google doesn't have more carrier support for its Wallet. That's probably because the other three major U.S. carriers have their own plans for NFC payments in the form of Isis, but that system won't be rolled out until next year. Sprint promises to work with Android partners Samsung, HTC and others to integrate the chips, but without Verizon and AT&T (two favored Apple partners), one wonders how many NFC- and Google Wallet-enabled handsets will actually arrive.
Google Wallet is free to users and partners, but if you give Google permission, it will use your location and transaction data to deliver you geo-specific offers. I assume Google will make money on those offers in much the same way they do ads. With all the recent issues Google has had with privacy concerns, I'm dubious as to why Google believes any consumer would trust Google with that information (though they've trusted credit card companies with it for decades).
For now, the Google Wallet field tests and Offers is only in New York and San Francisco. There are thousands and thousands of merchants ready to accept touch payments, but without the phones, Google Wallet will likely be sampled by a relative few.
The reality is that Google's plan for the future on mobile commerce, rewards systems and offers, is the right one, but my bet is it will not be the only one and that, in and of itself, could slow down the adoption of your phone as your Wallet. That would be a shame, because I think I'm ready to start carrying around something like a Google Wallet.