Google Wallet hands-on: cool but needs work

Is Google Wallet (s goog) ready to replace my credit card and wallet? Not really. Does it make me feel cool and futuristic? You bet!

That’s the feeling I get after playing with Google Wallet ahead of the big public launch today. It’s got a lot of promise but it will take some maturing to really change people’s attitudes toward paying with a wave of your phone. Don’t get me wrong, paying with your phone seems like a logical progression and I applaud Google for taking a first step. But that’s what this is, and Google’s own executives will tell you the same thing.

Here’s the basics about how Google Wallet works and then we’ll get into what works and doesn’t.

How Google Wallet works

As we’ve mentioned before, this is limited to just the Nexus S on Sprint (s s) so even the Nexus S for both T-Mobile and AT&T (s t) will have to wait until a deal is struck with those carriers. Users have access to a Google Wallet application that can quickly be set up using a Google sign-on. From there, you can choose to load up a MasterCard (s ma) credit card from Citibank (s c), which will directly pull from your accounts. Or you can do what I did, which is load up funds on to a Google Prepaid Card with funds from other credit and debit cards. You have to fill out all the address information to add funds from a card.

Once your Prepaid Card is provisioned, you can choose to make that the default payment card with one click. You will need to set a PIN to unlock Google Wallet but you can set the time-out for 1, 5, 15, or 30 minutes. That’s helpful when you want to unlock Google Wallet in line so you pay quickly. You can attach location to your payment history but it doesn’t record the actual store you visited, just an approximate address.

While you’re out and about, you just go to any PayPass enabled point of sale terminal and in lieu of a card, you can just tap your phone to pay and get a buzz on your phone to confirm the purchase. You will need to wake up the phone because of security reasons, the NFC chip won’t work until that happens. And if the time-out period has expired on the lock for Google Wallet, you will also need to enter your PIN before completing a transaction. From Google Wallet you can see an updated balance on your pre-paid card but again there is no detailed history about what you bought or where.

Google Wallet is tied to both Google Offers and Google Shopper. Users can search for local deals on Google Shopper and save them to their Google Wallet. They can apply their deals automatically through retailers and businesses who have enabled single tap and pay; their discount is deducted from their purchase. Many other offers, however, just require a user to show their phone coupon to an employee for instant redemption. You can also add loyalty cards to Google Wallet. That’s helpful for customers who forget their loyalty cards and it’s good for businesses who have enabled single tap and pay, so one wave of Google Wallet can also be recorded in existing loyalty programs.

What works well

When the system works as advertised, it’s a breeze. You don’t have to fumble with your wallet or pull out a card. My phone is generally easier to grab and pull out. But you do have to unlock the wallet, which is an added step over a credit card, although it’s a pretty painless process. I was also able to get a refund for a purchase, which was placed back in my Google Wallet account balance when I tapped it on the point of sale terminal.

Being able to attach offers to my Google Wallet is helpful and it’s cool to be able to redeem it automatically. It also feels safer doing transactions with Google Wallet. I can lose my actual wallet and my credit card can be charged up by a thief. Having a PIN to protect transactions adds a necessary layer of security. Google says the payment credentials are also encrypted and protected from other applications on the phone.

What needs work

First of all, there were a few times when I wasn’t able to complete transactions and a couple moments when I wasn’t able to load up cash to my prepaid card. These could just be pre-launch issues but it reminded me that it’s good to have a back-up when Google Wallet doesn’t work. A card usually doesn’t have those problems.

I’d also like to see my payment history actually include what I bought and where instead of just a time and an approximate location. I’m told that will come in future generations, and that would provide some really interesting data for me as a shopper. My card statement will have that information, but to have it on my phone would be great and would show the power of having an interactive wallet as opposed to a simple credit card.

The offers right now are pretty meager and so I don’t have much incentive to use Google Wallet to get deals. If I had more coupon options that I could easily tie to my phone, that would be a way to get me more excited about the wallet. I assume that will change as more partners start rolling out promotions, but there needs to be a healthy amount of deals to get the attention of users.

Also, there needs to be more payment options. Right now, you can only directly link a Citibank MasterCard. Visa (s v), Discover (s dfs) and American Express (s axp) just announced they are now licensing their technology to Google so their issuing banks will be able to connect their cards to Google Wallet. But it will take some months for that to happen. The Prepaid Card is a good interim option but it’s annoying loading up cash. That’s because the phone doesn’t store your payment information so you have to enter it each time.

And there needs to be more places to use Google Wallet. I appreciate using it at local drug stores and being able to pay for a cab with Google Wallet is very nice. But there are lot of smaller merchants who haven’t made the jump up to the contactless terminals. There’s more incentive now to change that but for now, the opportunities to use Google Wallet are more limited so it doesn’t feel like an everyday tool.

But with all that said, I like the start of Google Wallet. Many of these issues are just natural with any new technology that needs adoption. Google is showing, though, that it has a good platform to build upon. A lot will depend on how fast it can get handset manufacturers to incorporate NFC and how many more retailers it can line up to support Google Wallet. And it’s got to really deliver more value to users in the form of some great discounts or rewards for loyalty. Until then, it’s more of a cool tech demo that can turn some heads.