Google took the wraps off of Google Wallet, its new mobile payment system, making the announcement on Thursday from the company's New York office. Mobile payment systems have drawn the interest of banks and retailers, and the industry is hoping consumers will adopt the systems as well.
Google Wallet will allow users to make payments through a cell phone. In conjunction with this mobile payment system, Google Offers will offer users discounts when making purchases with Google Wallet.
The payments will be made through a Citibank-issued MasterCard. Currently, there are over 150,000 stores that have MasterCard PayPass terminals, which will be required in order to make Google Wallet purchases. Macy's, Walgreens, Subway, Noah's Bagels and Toys R Us will be the first consumer retailers to participate in the mobile payment system.
Initially, Google is partnering with Sprint to bring the technology to consumers. Near-field technology (NFC) allows two devices when placed near each other to exchange small amounts of data.
Google plans on making the mobile payment system available this summer, and the company said it will make the system available in New York City and San Francisco before expanding.
And on Wednesday, Bank of America, Wells Fargo and J.P. Morgan Chase announced that they will introduce an online payment service over the course of this year.
This new system, which is similar to the popular PayPal, will allow consumers to transfer money through text and email messages. The money can be sent to other customers of the three banks, a process referred to as person-to-person (P2P) payments.
These initiatives all point to the banking industry's interest in digital payment systems, an interest fueled by the relative success of partnerships between banks, retailers and Silicon Valley.
While trends in banking and consumer spending are hard to predict, the industry clearly sees mobile payment systems as part of the future.
In the long run, it is clear this is the new card, said Doug Johnson, vice president for risk management policy at the American Bankers Association. PayPal is so interested in this as the future, they sued Google.
PayPal and EBay recently filed a lawsuit against Google executives Osama Bedier and Stephanie Tilenius for allegedly stealing company secrets in relation to mobile payment systems.
The partnerships between Google, participating retailers and banks are vital for mobile payment systems to reach widespread adoption, Johnson added.
While we do have our differences, he said of the banking industry and retailers, at the end of the day, it requires a level of cooperation to be successful. We have done it in the past, and we will do so in the future.
While the lawsuit against Google may be an indication of the industry's desire to move forward with mobile payment systems, the eventual involvement of smaller community banks will be a sign of success for mobile and person-to-person payment systems.
You need a network of institutions to accomplish P2P, and the larger institutions recognize that, Johnson said, adding that smaller banks must eventually become involved. They're participation is central to success.
At the press event Thursday, Google lauded the security of Google Wallet, saying the security measures make mobile payment systems just as secure as credit cards. Security is bound to be an issue with consumers, adding to the difficulty of the adoption process for both consumers and banks.
There is a great desire to ensure that there is an impossibility of intercepting that data. We have those same challenges with internet banking, Johnson said. Some want chip-and-pin security for cards, but these mobile payment initiatives may eliminate the need for this in the United States.
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