Google unveils mobile pay service, PayPal and eBay sue

Google faced a lawsuit after it unveiled a free mobile application that turns a smartphone into an electronic wallet and is designed to replace plastic credit cards.

PayPal and eBay filed a lawsuit in a California state court charging that the Internet giant tapped into trade secrets for its newly released Google Wallet. Google did not immediately respond to the allegations.

PayPal spent three years trying to work out a deal in which it would handle payments for Android smartphones, only to see Google scuttle the talks and hire its lead negotiator Osama Bedier, according to court documents.

Bedier worked at the eBay-owned online financial services unit as a vice president of platform, mobile, and new ventures until being hired in January by Google.

He played a central role at Google's official unveiling in New York with financial partners Citibank, MasterCard and First Data and telecom ally Sprint, saying Google Wallet is being field tested and will be available this summer.

Google Wallet will initially work with Google's Nexus S 4G smartphone from Sprint, the third-largest US wireless provider, and will eventually be expanded to other phones equipped with near field communication (NFC) technology.

An NFC chip in a phone allows a user who has entered his or her credit card details to "tap-and-pay" for purchases at a checkout register equipped with the PayPass system from CitiMasterCard.

Customers can also use a Google Prepaid card to pay for purchases and take advantage of Google Offers, the Mountain View, California-based company's online discount coupon program.

The company said Google Wallet will be accepted at more than 124,000 US merchants at launch and more than 311,000 around the world.

Stephanie Tilenius, Google's vice president for commerce and payments, described Google Wallet as the "next generation of mobile commerce."

"We're building an open commerce ecosystem that for the first time will make it possible for you to pay with an NFC wallet and redeem consumer promotions all in one tap, while shopping offline," Tilenius said.

"We are looking at expanding internationally, Europe first and then Asia."

The PayPal lawsuit contends that Tilenius helped Google poach Bedier and named both executives and the Internet company as defendants in a civil case alleging misappropriation of trade secrets.

Mobile payments are being tested or used in a number of countries already, notably France and Japan, but Google Wallet will be among the first to bring NFC technology to stores in the United States.

NFC technology uses short-range, high frequency wireless to enable the encrypted exchange of information between devices at a short distance.

Three of the largest US wireless carriers - AT&T, T-Mobile and Verizon Wireless - announced in November that they were teaming up to build a national network called "Isis" to allow for payments by mobile phones.

They said they expect to introduce the service during the next 18 months.

Then-Google chief executive Eric Schmidt said shortly before the Nexus S smartphone hit the market in December that he expects tap-and-pay technology to eventually replace credit cards.
Forrester Research analyst Charles Golvin said it remains to be seen, however, whether Google can change the payment behavior of consumers, and it will take time and more widespread adoption to find out.

"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," Golvin said.
Andrew Eisner, director of community and content at Retrevo, agreed that "the big question is how consumers will warm up to NFC."

"So far it looks like consumers are a bit skeptical," Eisner said. "They worry about security and privacy issues."

Google said it has built a number of security systems into Google Wallet including the need for a PIN number and credit card encryption. If lost, the payment system can be disabled with a phone call.

In addition to allowing for mobile payments, Google Wallet lets consumers pay using gift cards and redeem promotions such as discounts or coupons.

"Google Wallet will start with offers, loyalty and gift cards, but some day items like receipts, boarding passes and tickets will all be seamlessly synced to your Google Wallet," Google said in a blog post.

Mobile Payment System in Salt Lake City by 2012

Paying for things with your cell phone could soon become a reality, at least if you live in Salt Lake City. That's where Isis, a coalition formed by Verizon, AT&T, and T-Mobile to bring mobile payments to the masses, plans to begin its rollout its platform early next year. Isis chose Salt Lake City because its transit system, run by the Utah Transportation Authority (UTA), is already equipped with near-field communication (NFC) - the key to any mobile-payment system. Both the customer's phone and the merchant's equipment must have NFC in order for it to work. In Salt Lake, half of that battle is already won. Just having NFC in the city's transit system is far from having a complete infrastructure, however. Over the next year, Isis plans to work with merchants in Salt Lake City so that when the service debuts, consumers will be able to use the system for more than just taking a bus or train. The Isis platform, which includes apps, payment integration, and other factors, is still baking as well, with Johnson describing it as still "in build." On top of that, there are scant few NFC devices currently available in the U.S. market. "The biggest challenge is working with the local merchant community to take the NFC infrastructure outside of transit and into everyday shops, and get to a critical mass." Isis is one of many efforts underway to bring NFC and mobile payments to the U.S. The technology is already common overseas in places like Japan, but it's had many false starts here. Sprint, the only major carrier not involved with Isis, is planning to launch its own mobile-payment system later this year. Both American Express and MasterCard are also spearheading efforts into NFC, and it's been rumored that Google and Apple are getting into the NFC game as well. Despite all the competition, Johnson says Isis brings to the table scale that the other players don't. Between the three carriers involved, Isis will be able to reach more than 200 million wireless customers. "Scale is essential," Johnson says. "For merchants to invest, they need to know there will be critical mass o the consumer side. For consumers to find it relevant, they need to know there's critical mass on the merchant side. The only way to solve that chicken-and-the-egg scenario is if you have a catalyst like Isis that can readily step forward with enough scale to ensure both sides of the ecosystem are going to be there. That's really what I think will separate winners and losers in this market." On top of that, the carriers can put pressure on phone makers to come to market with phones equipped with NFC, though so far there's little evidence of that happening. Nevertheless, Johnson says the carriers "are committed" to NFC handsets. Johnson says that Salt Lake City will be just the beginning. While many NFC pilot programs have come and gone in the U.S. with little to show for them, he says the 2012 deployment of Isis isn't a tentative "wait and see" launch. "Salt Lake is the first of many markets. We are committed to full commercial availability."

Google to offer mobile payment technology

According to a report by Wall Street Journal, Google is joining Citigroup and Mastercard to set up a mobile payment system that will turn Android phones into a kind of electronic wallet. The new technology, which is in its early stages, will allow consumers to wave their Android phones in front of a small reader at the checkout counter to make payments. The planned payment system would allow Google to offer retailers more data about their customers and help them target advertisements and discount offers to mobile device users near their stores. However, Google is not expected to get a cut of the transaction fees. Initially, holders of Citigroup-issued debit and credit cards would be allowed to pay for purchases by activating a mobile payment application developed for one current model and many coming models of Android phones.

Bank of America and Visa Inc to test cell phone payment

The largest U.S. consumer bank, Bank of America Corp and Visa Inc, the world's largest payment processor, are planning to begin a test program that lets customers use smartphones to pay for purchases in stores.

The program, to run from September through the end of the year in the New York area, is the biggest step yet by the two companies toward creating a "digital wallet" with a host of financial capabilities built into the latest, most sophisticated mobile phones.

Major U.S. banks, technology companies and cellphone providers are jockeying for the lead in the technology, which some say could become a primary means of everyday purchases.

Visa also plans to conduct a similar test program with US Bancorp this year. It would begin its pilot in October.

While mobile payments have been used for years in countries such as Japan, the United States has been much slower to adopt the technology.

The program will allow select New York-area employees and customers to install small chips, supplied by Visa and its technology vendors, in their smartphones that emit radio signals over very short distances.

Customers would then "bump" their phones with point-of-sale devices in stores - actually they need only wave the phones near the devices - and their bank account data would be collected and their purchases completed.

Visa said in February that it planned to start testing technology that would allow customers to make in-store payments using smartphones.

Latest developments on the matter suggest that Verizon Wireless, AT&T, T-Mobile USA and Discover Financial Services are working on forming a joint venture aimed at offering mobile payments services, people familiar with the matter told Reuters.

Bank of America, which introduced mobile banking in 2007, has more than 5 million customers conducting $15 billion in transactions via their phones - primarily bill payments and account transfers.