The Internet giant is aiming to make mobile payments easier in a bid to boost its advertising business. The planned payment system would allow Google to offer retailers more data about their customers and help them target ads and discount offers to mobile-device users near their stores, these people said. Google isn't expected to get a cut of the transaction fees.
The project, which is in its early stages, would allow holders of Citigroup-issued debit and credit cards to pay for purchases by activating a mobile-payment application developed for one current model and many coming models of Android phones. The idea is to turn the phones into a kind of electronic wallet.
These phone users also would be able to get targeted ads or discount offers, which Google hopes to sell to local merchants. They also could manage credit-card accounts and track spending through an application on their smartphone, the people said.
The venture also involves VeriFone Systems Inc., which makes credit-card readers for cash registers. VeriFone would roll out more so-called contact-less devices, or readers that enable consumers to pay with a wave or tap of a credit or debit card. The readers also would allow people to pay by tapping their smartphones, said the people familiar with the matter.
The credit-card readers involved all use "near field communication" technology that is already in place at thousands of merchants nationwide. Today, customers who have credit cards embedded with that technology have the option of waving a card in front of a reader, instead of using a traditional swipe method.
Google's Android mobile-device software, which powers hundreds of different devices, supports this technology.
The planned payment system would be unlikely to put consumers at any greater financial risks. As with conventional credit-card transactions, the card companies would cover the cost of unauthorized purchases. Nor is the NFC technology itself particularly vulnerable.
"Because it's contact-less there's a perception people can grab it from thin air, but it's actually a more sophisticated technology than credit cards with a magnetic stripe, making it more difficult to steal a consumer's payment information," said Nick Holland, a mobile-transactions analyst at Yankee Group.
The Google-backed system, which is expected to be released this year, marks the latest effort to broaden the uses of smartphones for everyday activities—from chatting to emailing to shopping. The telecom, technology and financial-services industries all are looking for strategies to make them leaders in the evolving business of getting consumers to pay for products with their phones. Offering that option could allow device makers such as Apple Inc. to sell more of their phones.
Wireless carriers Verizon Wireless—a venture of Vodafone Group PLC and Verizon Communications Inc.—AT&T Inc. and T-Mobile USA said last fall that they would team up on a venture, dubbed Isis, to enable customers to pay for goods with their smartphones. Discover Financial Services Inc. will process those payments, potentially eliminating the need to carry cash, credit and debit cards, reward cards and transit passes.
Google's move is part of its quest to sell ads and other services to local retailers, a growth frontier for Internet companies. Google executives, including outgoing Chief Executive Eric Schmidt, haven't been shy about saying that Android devices could serve as payment facilitators, thanks to NFC technology, though they haven't specified what Google's role will be.
"A phone is a lot smarter than a card," said Doug Bergeron, VeriFone's chief executive, in an interview. "It opens the door to a rich experience at the point of sale that retailers really covet."
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