January 04, 2011

BusinessWeek today says that according to two anonymous sources, Google is building a payment and advertising service for retail mobile payments that may make its debut this year.

As BS&T noted in a November article, many companies would like to be the Google of mobile payments, including Visa, MasterCard, PayPal, Bank of America, AT&T, Verizon and, of course, Google. IE Market Research puts the fast-growing mobile payment market at $1.13 trillion in 2014.

Speaking about NFC at a technology conference in November, Google Chief Executive Eric Schmidt said, "You'll be able to walk in a store and do commerce. You'd bump for everything and eventually replace credit cards."

According to the BusinessWeek article, Google is designing an NFC chip for phones that would hold a consumer's financial account information, gift cards, store loyalty cards, and coupon subscriptions.

The latest version of Android, called Gingerbread, has some NFC features, such as the ability to read information from NFC tags. BusinessWeek says the NFC-enabled Nexus S phone, developed with Samsung Electronics, will serve as a test for a Google payment and ad service. All told, there are 52.6 million NFC phones in the world today and consultant iSuppli expects there will be 220.1 million NFC phones shipped in 2014.

Last year, Google bought Zetawire, a Canadian startup with a patent on a way to combine a phone-based wallet with a reward-and-loyalty system. Google Ventures, the company's venture capital arm, also invested in Corduro, a developer of mobile-payment solutions.

Google is starting its mobile commerce efforts on the advertising and marketing side -- it already has 59% of the $877 million mobile ad market, the article states. It's giving merchants NFC tags that can be read by NFC-enabled phones. Since mid-December, it has handed out hundreds of NFC kits -- including window tags and fortune cookies to give to customers -- to businesses in Portland, Ore., where Google is testing a project called Hotpot.

In the test, users scan NFC-enabled window decals with their Android phone to see the business's work hours, read reviews, and rate the business, the article says. To promote the technology and local advertising, Google gave out 22,000 T-shirts at a Portland Trail Blazers basketball game. The company hopes to take Hotpot national.

Building strong relationships with retailers and phone users is a smart way to smooth Google's path to mobile payments. But the payments business is different from search and advertising. Chances are Google will end up partnering with PayPal, the card networks and/or others to handle mobile payment transactions.

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