Google Wallet, the changes to the way we pay

Google Wallet, Google's groundbreaking initiative to allow U.S. consumers to pay for items using their phone as a virtual credit card, simply works.
That's good news for Google, because millions of Americans already know how to pay with a plastic credit card. However, Wallet currently lacks the conveniences and benefits that will be needed for its long-term success.


Google Wallet has been launched in a public trial, the new jargon for a beta test, about four months after its introduction. Using a small near-field communications (NFC) antenna mounted inside the rear of the phone, an embedded security token, and some accompanying software, Google Wallet allows users to simply tap (or touch) the phone to a payment terminal. Money is automatically debited from an attached credit card.
Why use Google Wallet? Because it implicitly promises that you'll eventually be able to leave your wallet at home, or at least stuff your driver's license into a shirt pocket.

"Really, this is a tool for consumers," said Marc Freed-Finnegan, the senior business product manager for Google Wallet, in an interview. "We hold your card. We hold your stuff. And we pass the card to the merchant, as if you tapped a plastic card. Google isn't processing, we're not in the middle of the transaction, and we're just creating this tool to organize your life, create money with offers, and organize your life with your loyalty card."
Google announced Google Wallet in May, saying then that Google Wallet will work on Sprint's Nexus S 4G, MasterCard credit cards issued by Citi, and at retailers equipped with Mastercard's PayPass terminals. The transactions will be processed by First Data, an Atlanta-based company.

On that score, nothing has changed, leaving Google Wallet available to just a small subset of phone users who have purchased a Nexus S. (Nexus S owners will be able to download the Wallet app from the Android Market today as part of an "expanded public trial".) Over time, though, Google is expected to add Wallet capabilities to more and more phones, assisted by its purchase of Motorola's cell-phone business. For now, unfortunately, it's easy to dismiss Google Wallet as a nice gimmick to impress workers manning the counter at popular national fast-food restaurants.

Google said it has also licensed the Visa, Discover and American Express NFC specifications, so that those cards can be entered into future iterations of the Google Wallet. "With this partnership, Visa account holders will now be able to use Google Wallet through Visa payWave," at hundreds of thousands of terminals worldwide," a Visa spokeswoman said in an email.
It's also worth noting that Visa and PayPal have also promised their own NFC solutions, but Google is first out of the gate. Apple, so far, has remained quiet.

How it works
I wrote previously that what Google Wallet needs to succeed is to establish itself as a habit. After testing Google Wallet with a Google-supplied Nexus S off an on for several weeks, I can report that is in fact the case. Google Wallet is also about as fast as paying with a credit or debit card.
Here's how it works: you open the Google Wallet app, punch in a 4-digit PIN code to unlock it, and then, when it comes time to pay, touch the phone to the terminal. Behind the scenes, the NFC radio transfers the money securely. The transaction takes just a split second; the phone vibrates, and its screen displays "Sent!" No signature required - you're done.
Simple, right? For the most part, yes.

The first time I flew solo on Wallet, it didn't work. It may have been my fault; I was unfamiliar with the technology, I was in line at the pharmacy to pick up a prescription, and I didn't want to fool around. But you'll also notice that transactions won't go through because the person behind the counter simply doesn't know you've paid. Remember, they're trained to look for a customer swiping a card.
By the end of the trial, however, using Wallet came naturally. Enter the PIN ("PIN in," in Googlespeak), tap, and go.

Before you pay, however, you'll need to know how to actually load funds into the Wallet. Users have a choice of either using a Citi Mastercard or, as most will choose, a Mastercard-backed Google Prepaid Card that already exists inside the Wallet app. Google implicitly encourages using the latter, and will give you a free $10 if you load it by the end of the year. If you've ever used a phone card or some rail passes, the concept of "topping up" the card by periodically adding funds to it shouldn't be too foreign.
In either case, you'll need to link the Citi Mastercard to an actual physical card you own, or link the Google Card to your existing credit card.

Tapping the "Payment Cards" icon within Google Wallet reveals how much money you have available. Tapping the Google Prepaid Card again also allows you to top up the card and displays a user ID and phone number to call in case of problems. You'll be dealing with the Money Network, a third party that Google has contracted with to administer the card.

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