These mobile wallets will be initially available only on Google's Nexus S phone and will use a Citibank-issued Master Card credit card number and a virtual Google Master Card prepaid card. Consumers can make payments at any of the 124,000 merchants that have Master-Card's Pay Pass terminals, which accept contactless payments.
The three companies have also teamed up with a few retailers - Macy's, American Eagle Outfitters and Subway. After these retailers upgrade their terminals - at first, only retailers in New York and San Francisco will participate - consumers will also be able to redeem discounts and participate in loyalty programs.
For years several companies have been working on mobile wallets that have not been adopted due to certain reasons that include how the various stakeholders will be paid and how the wallet will take shape. Mobile phone carriers, banks, credit card issuer's payment networks and technology companies have been conflicting over their roles.
"Google is dipping their toe into the water and it will accelerate other efforts from other providers," said Rick Oglesby, a senior analyst at the Aite Group, a research and advisory firm focused on the financial services industry. Google plans to use a technology called near-field communication, or NFC, which is incorporated into a chip in mobile phones to make payments, redeem coupons, earn loyalty points and receive special offers.
When a phone is waved in front of a credit card reader, it wirelessly sends an encrypted signal with a person's credit card information. After which, transaction is processed like a normal credit card transaction at a store.
Google's announcement has been expected since it introduced the latest version of its Android mobile phone software, which has the capacity for NFC, and its Nexus S phone, which includes an NFC chip.
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