Google, PayPal See NFC Mobile-Payment Boom

Executives from both Google and PayPal are extremely bullish on mobile payments enabled with near-field communication technology.

Google Executive Chairman Eric Schmidt said he expects that a third of checkout terminals in retail stores and restaurants will be upgraded to allow NFC mobile payments from mobile phones within the next year.

"I judge that based on how long I think it takes, because the terminals are available now, the software is available now or this summer," Schmidt said at the Cannes Lions ad festival last week. He noted that several other vendors, such as Research In Motion, LG, Sony Ericsson and Apple, would soon sell phones with NFC chips. Google Wallet would work on these phones.

Schmidt is waxing bullish with great purpose: Google has a huge horse in this mobile-payments game. The company last month introduced Google Wallet, a mobile-payment service launching soon in New York and San Francisco.

Wallet specifically includes a free mobile application that will let owners of Samsung Nexus S 4G smartphones from Sprint use their phone as a wallet at some 20 retailers and restaurants. Users tap their phones to a point-of-sale system made to pay for goods. Google Offers, the new local deals service, is being used as the hook to get consumers using Wallet.

This is enabled by NFC technology, a short-range wireless technology that allows communications between sensors brought within close proximity. The technology has been widely adopted in Japan, with over 70 million phones equipped with NFC chips necessary to enable mobile transactions.

Interestingly, Google said it is testing NFC base stations in Japan that let consumers tap the base station with their NFC-enabled phone to leave a rating or review for the place where the station is located. Google will also recommend other places consumers might like.

Google couldn't do this in the U.S. because there is a paucity of NFC supporters, which is one of the challenges Wallet will face when it launches.

Google's rival in this game, PayPal, is also a fan of mobile payments. Laura Chambers, senior director of PayPal Mobile, said the payments arm of eBay is logging up to $10 million in mobile payments a day and now projects $3 billion in mobile-payment transactions for the year.

"Mobile payments are growing at a rate we never could have imagined when we started processing them back in 2006," Chambers said. "We first predicted $1.5 billion in 2011 mobile-payments volume. At our analyst day in February, we upped that to $2 billion, and just a few months later, we have now added another billion to that number."

Moreover, PayPal currently sees 8 million customers regularly making purchases on their mobile phones, up from a previously reported 6 million users.

Google Wallet and PayPal Mobile have different approaches honed by great brands. PayPal's mobile payments are organic, as the company is associated with virtually every major financial-service player.

Google is trying to win the hands of retailers, local merchants and, eventually, consumers. Both companies appear poised for a long, drawn-out battle.