Google, MasterCard, Citigroup Huddle on Android Phone Payments

Google's mobile-payment plan is evolving with Citigroup, MasterCard and VeriFone Systems as partners to help users wave their Android smartphones to pay for goods.

Further details have emerged regarding Google's mobile-payment plans for Android smartphones, which includes using near-field communication technology.

Google is working with credit card providers MasterCard and Citigroup to let consumers make purchases by waving their smartphones at point-of-sale terminals made by VeriFone Systems, the Wall Street Journal said.

The service, which involves embedding chips, software and sensors based on the NFC (near-field communication) short-range wireless technology in Android mobile devices, will launch later this year. Google declined to comment on this report.

MasterCard and Citigroup debit and credit card owners would pay for goods and services with a mobile-payment application for the Samsung Nexus S, a smartphone based on Google's Android 2.3 "Gingerbread" operating system, which includes native NFC support to enable mobile payments.

Future Gingerbread phone models, such as the Samsung Galaxy S II, could also include this technology.

To entice users to try its mobile-payment system (and to make money from it), Google would offer targeted ads for discount offers from local merchants.

Google is testing Google Offers, a fledgling, Groupon-like local deals service. A Nexus S smartphone user could come within close proximity to a participating store and receive offers for discounted goods. Google could take a cut of any transaction facilitated by this deal connection.

The Journal's report comes less than two weeks after Bloomberg said Google teamed with VeriFone Systems to test mobile payments on thousands of cash registers in New York and San Francisco. VeriFone Systems makes credit card readers for cash registers that let consumers pay by tapping their smartphones.

Google's move with the credit card giants is part of a broader push to turn the smartphone into a wallet across several vertical markets. Making the smartphone a wallet would help users transition away from feature phones.

Phone makers appreciate this because it would help their handsets find homes among hundreds of millions of consumers. Carriers are pushing the mobile-payment plan because it means more data consumed, which translates to more dollars. To wit, Verizon Wireless, AT&T and T-Mobile have teamed on ISIS to enable such mobile payments.          

Internet companies such as Google can insert themselves in the middle of the commerce equation, connecting businesses with consumers. Google would learn a lot more about consumer behavior in the process, boosting its ad targeting capabilities.

Google isn't the only smartphone platform proprietor looking at NFC. Research in Motion is building Blackberry phones with NFC, while Apple is building NFC for a future iPhone release.