Google Unveils Mobile Payments System With Google Offers, Google Wallet

Google (NSDQ: GOOG) is getting ready to lift the curtain on its long-planned mobile payments system, which involves turning Android-powered smartphones into an electronic wallet. The deal is kicking off with an agreement with Citibank, Mastercard, First Data, Sprint (NYSE: S) and retail support from Macy’s, Walgreens, Subway and others.
While just about any announcement from Google is bound to get mainstream attention, the growth of mobile payments has been slow in the U.S. the past few years, though the concept is gaining acceptance. How much of a boost will Google provide to the space? Not much initially, but it does lay the ground for what will likely become a part of the way people transact in the offline world in the near future.
As Forrester research analyst Charles Golvin wrote in an morning note in anticipation of the announcement: “Relying on an installed base of phones that is today indistinguishable from zero, a single payment system, a single card issuer, and a modest network of merchants capable of accepting these phone-based payments means that the near-term impact will be negligible. But Google’s interest here isn’t in the payments, it’s in the data that underlies the complete chain of commerce including consideration, promotion, transaction details, coupons, and receipts.”
Taking the stage at Google’s New York headquarters, former eBay (NSDQ: EBAY) exec Stephanie Tilenius, now Google’s VP of commerce takes the stage and announce “Google Offers” and “Google Wallet.” “Our belief is that all commerce, not just e-commerce, is ripe for change. E-commerce is poised to exceed $1 trillion by 2013. We believe the shopping experience hasn’t truly been transformed by digital. The way people pay for things haven’t changed since the dawn of commerce, from barter to paper to plastic.”
The Age of MoLo: After a quick presentation by a Mastercard representative, Tilenius is back talking about the age of MoLo,” where mobile and local commerce merge in the offline world. “We’re announcing our first steps in making this vision a reality. It will take a while. But we plan to invest with Mastercard and Citi to create an open source system.”
Google Wallet: Kicking off a field test today in San Francisco and New York with a full version this summer. It uses NFC technology, a popular mobile payment system. Osama Bedier, former Pay Pal exec and now Google’s vp of payments, says that the product will be more than just payments. It will include identification, store boarding passes — essentially, it wants to literally be a virtual wallet. Through the Citi Payments system, Google Wallet will be accessible at over 300,000 merchants globally. In the beginning, Google Wallet will be compatible with Nexus S 4G by Google, available on Sprint. Over time, it plans on expanding support to more phones.
Google Offers: It’s more than another daily deals, Tilenius says. Offers will come via e-mail or through search. One you find an offer you want, you can go to a merchant and tap the app as you check out. It will be available in SF, NY and Portland this summer. Google Wallet will also include “loyalty cards,” and the ability to pass digital receipts and go paperless. Eventually, games and puzzles may also be included in the Google Wallet as well.
Android sales dominate Sprint: Fared Adib, Sprint’s Vice President of Product Development, finished up the partner presentations. “A carrier should not dictate the experience on your phone. One of the things we’re excited about the Google Wallet is to be the carrier of choice. We will integrate it with our manufacturer partners such as Motorola (NYSE: MMI). Over 75 percent of our sales come from Android powered phones. And Nexus S 4G is one of our biggest sellers.”
Ad revenue: Assuming consumers give us permission, we can target them with offers. They’ll also be able to pull offers, Tilenius said. “We make money on the offers piece and the Wallet app is free.”
How open is open?: While it’s starting off on Android phones, Tilenius said Google is reaching out to all smartphone operating system providers. The only requirement is that it be on he NFC platform. The expectation is that there will be 50 million smartphones by the end of this year. “We’re working with all the carriers,” she said. “In terms of iPhone, Microsoft (NSDQ: MSFT), Rim, we will partner with everybody who embraces NFC. “it’s a chicken and egg problem — we’re trying to create a compelling model within an NFC standard system that everyone will want to join,” added Bedier.
International expansion: Europe and Asia will be rolling out over the next few months as well, but it depends on how quickly Google can get agreements with carriers and merchants.
No ad campaign yet: In response to a question from AdAge’s Kunur Patel, Tilenius said that there were no plans to market all of this just yet. They want to see how the field testing goes, what the response is from merchants before rolling out a big ad campaign.