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Google Wallet opens for business

The virtual wallet for smartphones is designed to replace real wallets by allowing users to store payment information and to purchase things simply by tapping their phones.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
6 min read

Google Wallet, which will allow people to tap or swipe their phones to pay for things, officially launches today on its first smartphone, the Samsung Nexus S offered on Sprint Nextel.

Google Wallet CNET/Marguerite Reardon

While several other companies, including credit card giants Visa and American Express, as well as mobile wireless carriers, have also announced plans to launch their own digital wallets, Google is the first to take its digital wallet to market.

Citibank, MasterCard, and Sprint are the initial launch partners for the service. What this means for users is that, initially, virtually the only credit cards that will work with Google Wallet are Citibank MasterCards. Google is also offering a Google Prepaid MasterCard as well, a workaround for people who may not have a Citibank MasterCard. People who want to use this card can preload money from other credit cards onto the Google prepaid card. And then they can make purchases using the phone.

Sprint is the first official carrier partner since it is the carrier offering the Nexus S 4G. But as other Android smartphones equipped with NFC (near-field communications) technology come on the market, other devices on other carriers will eventually be able to use the service too.

Google also said today that it has licensed NFC technology from other major credit card companies: American Express, Visa, and Discover. This means that upcoming versions of Google Wallet will support those credit cards as well.

"In the future, our goal is to make it possible for you to add all of your payment cards to Google Wallet, so you can say goodbye to even the biggest traditional wallets," said Osama Bedier, vice president of payments at Google.

Google hasn't said how long it will before it expands the Google Wallet offering beyond its initial launch partners. For consumers to load other credit cards, Google will also have work out agreements with various payments that issue the credit cards. John Partridge, president of Visa, said in an interview that it would likely be a matter of months before all the necessary work is completed to put a Visa credit card in Google Wallet.

"What has to happen next is that the banks have to have to agree to give access to their payment credentials," he said. "Those discussions are already under way. But in terms of logistics, I'd say it's a matter of months. Not a long period of time."

Google announced the new virtual payment system in May.

How it works
The way Google Wallet works is simple for users. There is a chip embedded in the phone that uses NFC technology, which allows for secure communication between devices at very short distances.

MasterCard has PayPass terminals at more than 144,000 merchants throughout the country, including in New York City taxi cabs. And Google Wallet should work on all of them. MasterCard has included a free app as part of the Google Wallet experience that helps customers locate PayPass terminals.

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New Nexus S devices will be sold with the Google Wallet app loaded and turned on. Current Nexus S customers will get an over-the-air update that will turn on the functionality. The NFC is embedded in the phone. For early adopters, Google is offer $10 to all those who start using Google Wallet.

But Google says it wants its digital wallet to be able to do more than payments. The real opportunity the company sees is in the offers it can provide to consumers from retailers. As part of Google Wallet, it's also delivering the Google Offers deals service, which allows people to enter loyalty cards into their Google Wallet. Eventually, the Offers program will also send promotional deals to customers based on where they have shopped or where they are located.

Google has put together an FAQ to answer consumer questions about Google Wallet.

A closer look at Google Wallet

See all photos

Competition looming
While Google may be the first major company to release a commercial version of its digital wallet, it won't be the only one for long. Other companies are also planning to launch their own versions of a digital wallet. And it's unclear which will be the winners and which will be the losers in this battle.

Credit card companies American Express and Visa also plan to launch their own forms of digital wallets. These companies seem to be hedging their bets in some ways. The major credit card companies are also working with AT&T, Verizon Wireless, and T-Mobile, which have formed a joint venture called Isis that is also developing a digital wallet for smartphones.

Visa's Partridge said that it's all about giving consumers choices.

"We are going to continue to work on our own wallet," he said. "We've licensed PayWave to Isis too, and now to Google. The reason and rationale is that we want to make certain that Visa card holders have the opportunity to participate on various platforms to use their card. So it's to give them choice."

He wasn't able to say if a Visa credit card would be able to be included in Google Wallet before Visa launches its own digital wallet. He said the timing could be close, given that Visa is months away from releasing its digital wallet, which has yet to be named. Still, he said he isn't worried that Google Wallet will compete against the Visa digital wallet.

"It's going to be a Visa transaction whether you pull your card out of a leather wallet or you use your phone," he said. He added that consumers will end up using whichever digital wallet best meets their needs.

The advantage credit card companies have over Google is their strong brand among consumers for providing payments. In a recent survey of consumers, traditional credit card companies, which included Visa, MasterCard, American Express, and even PayPal, scored the highest when consumers were asked who they trusted more to offer mobile payments.

Google scored much lower, according to the Ogilvy & Mather survey.

Advantage Android? Or carriers?
Google's advantage over the credit card companies it that it is the first to offer a digital wallet using the NFC technology. And since the company controls the widely used Android operating system, it can easily embed the technology and Google Wallet application into new devices coming to market over the next few years.

That said, NFC technology is only now being included in devices. Currently, the only Android phone with NFC embedded is Google's Nexus S phone, which is sold by Sprint Nextel. Google promises that more NFC devices are coming in 2012.

But even once devices have the NFC technology embedded, wireless carriers still control which features are activated on phones that they sell through subsidies. And wireless operators AT&T, Verizon Wireless, and T-Mobile USA plan to sell their own digital wallet through their Isis partnership. This means that if AT&T and Verizon Wireless want to promote the Isis digital wallet instead of Google's they could disable the latter's app on the phone.

"Mobile operators are an important part of the chain," Bill Gajda, head of Visa Mobile Global, told CNET in an earlier interview. "They are responsible for distribution of 90 percent of the phones in the U.S. and they subsidize the handsets. So I think they have a lot to say in terms of what features get turned on or not."

The other big question in the mobile market is what Apple will do. The company has been rumored to be including NFC technology in the upcoming iPhone expected to hit the market next month.

Although Apple hasn't announced plans for a digital wallet, the company's iTunes music and App Store could give it a basis to develop one.