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September 19, 2011

There's a rumor in the blogosphere today that Google Wallet could launch sometime today. Of course this is just hearsay, but it's a good possibility according to some. There's a lot of momentum being generated around the topic of mobile payments.

Late last evening, social-media blog TechCrunch posted an image purporting to be from Google Wallet partners, showing some documentation on the new service.

That documentation suggests that Google Wallet is launching September 19, 2011. Well that's today.

Then this morning, another blog, GigaOm, posted an image, taken by one of its reporters at a coffee shop in San Francisco, of a Google Wallet payment reader. The reader provides directions on it, saying users must "tap" their smartphone against the device in order to "pay by smartphone."

Google unveiled its new Wallet service in May. The new system, which relies upon near-field communications (NFC) technology to work, allows users to pay for products by simply tapping their smartphone against the Google Wallet-enabled reader.

In November of last year, Verizon Wireless, AT&T Mobility and T-Mobile USA created a new mobile payment system called ISIS. It was designed to help wireless users easily pay for certain items at physical stores using their mobile phones and MIDs (mobile Internet devices), the three wireless carriers have said. However, the three wireless carriers cancelled ISIS in May, pending further notice.

But in the case of Google Wallet, there are still a few barriers that need to be ironed out in order to get the system running smoothly.

First, users need the Android-based Nexus S smartphone, which has an NFC chip in it. In addition, the service is only available with MasterCard's PayPass system. According to the Google Wallet site, the service will work with Citi MasterCard credit cards and the Google PrePaid Card.

Additionally, Google Wallet can store gift cards from participating merchants, Google says. Mobile payment systems and QR Codes are viewed by many as the next big thing in eCommerce. A slew of companies are vying to carve out a portion of the mobile-payment service in addition to Google, including PayPal, Visa, and American Express. The global market for mobile payment systems is estimated at $50 billion for 2012 and at over $60 billion for 2013 according to experts.

There is also rampant speculation that Apple's iPhone 5 will come with near-field communications as well, paving the way for that company to also enter the eCommerce segment in a way that wasn't possible less than four short years ago.

But such fragmentation could prove troublesome for certain consumers. In order for mobile-payment services to work, several stakeholders need to be on-board, including merchants, credit card companies, and mobile device vendors.

All the major U.S. wireless carriers are also planning to make a splash in the market, which could drastically alter which service comes out on top.

Regardless of wins the race, it appears that companies see a bright future for people paying for products from their smartphones, rather than being forced to open their wallets and take plastic out everytime.

Google has been especially focused on driving home the value of a mobile-payment system. Last week, the company unveiled an ad for its Wallet service showcasing Seinfeld character George Costanza's troubles with his own, massive wallet. The ad ends with a simple catchphrase: "Goodbye, wallet. The phone will take it from here."

Exactly when Google Wallet will launch, however, still remains to be seen. The service's official Web site still says that it's "coming soon," and so far, Google has remained tight-lipped on the launch. The search company did not immediately respond to a request for comment we sent earlier this morning.

In other mobile payment system news

In March, MasterCard's PayPass Division says it has approved Gemalto's new NFC payment software platform to handle transactions on a SIM card. The new secured system runs on Gemalto SIM chips, allowing a wireless network operator to host a PayPass application on its SIMs.

Once such a SIM is inserted into a NFC-capable mobile handset or smartphone that supports the SWP protocol, the network operator or wireless carrier could offer MasterCard the ability to provision PayPass to that customer.

NFC is the short-range (up to 10 cm or 4 inches), high frequency wireless communication technology that wireless carriers hope to employ in their aspirations for a nationwide mobile banking network. The technology allows devices such as smartphones and MIDs to collect or transmit data to another NFC-enabled device without manual configuration to identify mobile devices.

Wireless carriers hope to see the technology eventually integrated with POS (point-of-sale) systems across the U.S. Gemalto’s new MasterCard PayPass SIM will let you use your smartphone to make NFC payments. Near Field Communications comprises a radio technology operating at 13.56 MHz and capable of being powered by induction from the reader, which is combined with a secure element used to store cryptographic keys and authentication details to manage mobile payments.

Last November, Verizon Wireless, AT&T Mobility and T-Mobile USA created a mobile payment system designed to help wireless users easily pay for certain items at physical stores using their mobile phones and MIDs (mobile Internet devices), the three wireless carriers have said earlier today.

Dubbed 'Isis', the technology is rapidly gaining ground and is getting increased credibility and recognition, and the three companies are building the new payment network with the initial goal of setting up a system in which people can use smartphones to easily pay for products or services directly at a retailer, known as PoS (point-of-sale) purchases. A similar system has already been in place for the past two years in many Asian countries.

The new solution will use a technology called NFC (near-field communication), which provides short-range and encrypted wireless communications between different mobile devices. The three carriers say the system will include strong security and privacy protection.

The radio component is embedded in the mobile handset, squeezed into a Micro-SD card. Mobile handset makers generally want it in the phone, banks like removable memory cards, while wireless operators would prefer it stored in the SIM and communicating over the Single Wire Protocol, SWP.

So as you might expect, the topic of NFC (near-field communication) is still open to some debate among various observers in the wireless industry, but the fact that MasterCard has approved Gemalto's new NFC payment software and that it's embedded on a SIM is great news for the industry and also Samsung, after the company announced in December a new NFC chip with embedded flash memory that wireless handset makers all over the world can now integrate in their smartphones and MIDs (mobile Internet devices).

NFC technology and ISIS is now being seen as a great new method to get wireless operators to buy more expensive SIM chips. However, Gemalto still needs to encourage network operators to pay for the SIMs, and to deploy some NFC/SWP capable mobile handsets to make use of them. The Nexus S and Nokia C-7 both fit that specification, but RIM's new handsets might not, however.

In the past, there's been a few attempts to squeeze a NFC radio into a SIM card, but there were some issues. Device Fidelity, which makes a NFC radio embedded in a Micro-SD card, admits that it's sometimes a rather challenging technology.

There's no doubt today that the future of NFC is smartphones, with radio antennas and induction loops built into the casing as already specified by Google, and about to be specified even by RIM and Microsoft.

More on ISIS

Isis is expected to be available around April or May 2012. In Japan, China and other Asian countries, a similar system has been in place for about two years now. It was only a question of time before a similar payment solution would be implemented in North America, some wireless industry observers have said.

In fact some are asking what's taking carriers so long in implementing a working and secure solution, and why will it take them another 18 months for it to be completed.

On Tuesday, Google CEO Eric Schmidt presented an upcoming Android smartphone with a near-field communication chip. Some say it could be the Nexus S, but it's still too early to tell at this time. More is expected from Google in the next few weeks, however.

Isis has already recruited two major financial players to participate in the new joint project. Discover Financial Services will work with Isis to develop the overall infrastructure for the mobile payment network, while Barclay Card U.S., a Barclays Bank subsidiary, will be the first credit issuer on the network.

Meanwhile, Isis is leaving the door open to other banks, financial institutions and other wireless carriers that want to be part of the new venture, and that wish to commit their own expertise and invest in the project.

Additionally, former GE Capital executive Michael Abbott has been hired as Isis CEO. The decision was well received in the wireless community, since Abbott has a lot of experience in the field of corporate finance and related topics.

And beyond the large amount of work that Isis is initially planning, Abbott has sublime goals for the new payment system.

"Through various relationships with merchants, our new mobile commerce network will provide an enhanced, more convenient, more personalized shopping experience for for wireless users. While mobile payments will be at the core of our offering, it's only the start. We plan to create a 'mobile wallet' that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets, transit passes, etc, etc," said Abbott in a prepared statement.

Isis marks the first time AT&T and Verizon have worked on a joint venture since the breakup of the AT&T monopoly in 1984, according to a Verizon spokeswoman.

The initiative will change the way people buy products and services. Consumers will no longer have to carry around multiple credit cards in a bulging wallet if they can use a smartphone instead. And since most people have smartphones today, it won't be a problem for most of them.

"Consumers are looking to do more and more with respect to simplifying their lives," said Ryan Hughes, vice president of new business development for Verizon Wireless and a member of Isis’ steering committee.

"What we’re trying to do is, as we’ve seen in many industries that go from analog to digital, is lead the transition from plastic to mobile and simplify the way you shop and pay for the product."

To make a purchase, all a shopper needs to do is to log in to a secure, password-protected application on an Isis-ready phone and hold the phone near an electronic reader at the checkout counter. The microchip allows the customer to transfer encrypted information to a bank or credit card company. Consumers would sign for the amount and receive a bill much like a traditional credit card each month.

Account holders would sign up for these digital credit, debit or prepaid cards through Barclays. Wireless handset makers will create cell phone microchips that consumers will need for wireless payments, and to build point-of-sale phone readers for stores.

Isis purchases will run through Discover’s payment network. A Verizon Wireless spokeswoman declined to comment on whether Discover would charge merchants less per transaction under the program. But merchants have been complaining for many years about the high fees they have been charged by credit card companies, and they are now hoping that Isis will help them pay lower fees on each sale.

In October, Visa and MasterCard settled a U.S. antitrust suit that alleged the companies’ contracts unfairly prevent retailers from steering customers to other cards.

In may, Visa introduced a product that can transform most smartphones, including Apple’s iPhone, into payment devices that can store multiple card accounts in an "e-wallet."

Chip-activated smartphones already exist in Japan, the U.K. and Turkey, while other U.S. companies are working on similar contactless payment technologies. In December, Google is expected to release its newest version of its Android mobile phone operating system, codenamed GingerBread, which will include special chips and could be used in eCommerce, the company announced yesterday.

Bank of America began testing similar technology more than six weeks ago, while JP Morgan Chase and Wells Fargo are developing their own pilot programs, according to Visa. Additionally, U.S. Bancorp will begin testing the technology in multiple states in the next two weeks and plans to offer it to select customers in January 2011.

Some industry observers are confident Isis will work where other attempts have failed in the past because of the scale of its partnership, amounting to more than 200 million potential customers between the three largest wireless providers in the U.S.

However, Jeff Kagan, a wireless industry analyst based in Atlanta, Georgia, is only cautiously optimistic about the new initiative. "This is the right idea and the right direction to go into, but we’ve already seen other similar announcements in the past that sounded just as good, but they never worked."

In 1998, Microsoft made an attempt in creating its own wallet application but the project never got off the ground. Using MasterCard's PayPass tap-to-pay system consumers can simply swipe or tap their phones to pay for everything from a Coke in a vending machine to a ride in a New York City taxi or to get a quick lunch at a McDonald's restaurant anywhere in the United States.

At an event in New York City this week, the company showed off some of the capabilities of the Google Wallet, which was announced in May and is expected to launch this fall. And it also showed off some new applications for mobile payments that it hasn't commercialized yet.

It's pretty obvious now that MasterCard wants to compete headon with Visa International on mobile payment systems. With the Google Wallet, MasterCard showed how users could easily open the wallet with a four-digit password, choose which credit card to use, and then tap a vending machine to buy a Coke.

Unfortunately for the demonstrators, the cellular phone network used by the vending machine to authenticate the payment had a weak signal. So the purchase didn't actually go through.

Another demonstration showed how Google Wallet can keep track of spending for consumers. And if a certain predefined limit is hit, it lets the user know.

In addition to the Google Wallet integration, MasterCard showed off how it plans to use QR Codes to let people buy things more easily. In one demonstration it showed how a QR Code could be shown as part of a home shopping channel to allow people to buy items they see on TV directly from their phones.

And in another demonstration, a TV commercial broadcast a high-frequency audio code that could be identified by the phone. In each instance, the featured item on the TV appeared on the phone's screen. The shopper was then given the opportunity to pay for the item or save it in a shopping cart.

MasterCard also showed how QR Codes could be used on posters in retail locations or in other public places to let consumers buy goods on the spot. The company used a poster advertising a concert to demonstrate this. A user could scan the QR Code or tap the phone to an NFC receiver to get access to a page where tickets to the concert could be bought.

Consumers also had the choice of unlocking a video of the band.

And then MasterCard showed how a customer using a QR Code reader or the NFC capability on a smartphone at a fast-food restaurant could order directly from the phone without standing in line. The code and the NFC receiver were embedded in the table, and the idea was that once patrons ordered and paid for their food, the server could just bring the food directly to the table.

Some of these new payment apps and features are being tested now in commercial markets, but MasterCard wouldn't say when these new services would be generally available.

The hope is that as more smartphones come on the market with NFC technology embedded and with the ability to read QR Codes, mobile payments will become the new way of paying for small and everyday items.

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Source: TechCrunch.