Google is to offer a mobile phone payments system using its Android operating system, however this is to be initially launched in the USA.
Technology to pay for goods and services with a mobile phone is advancing quickly. Quick Tap, which is a partnership between Barclaycard and Orange to offer contactless mobile payments, has already been launched in the UK.
Google has announced its entry into this market using a payments system based on its Android operating system and a wireless technology called Near Field Communications (NFC).
NFC devices talk to each other over short distances of up to a metre so an NFC enabled mobile phone could be waved in the general direction of an NFC enabled cash terminal and send a cash payment over the wireless link.
There are a number of technical challenges to overcome with this technology, the most important being the security of the payments system. It is easy to imagine someone with a rogue NFC receiver standing nearby receiving the payment details, for example.
Mobile phone payment systems will challenge the dominance of major credit card companies such as Mastercard and Visa, however these companies are vying with major technology companies such as Google, Apple and PayPal to create the most competitive phone based payment systems.
Google is partnering with Verizon in the USA to install thousands of NFC enabled cash registers. It already has a NFC enabled device with its Google’s Nexus S handset, but will offer many more compatible Android based phones from now on.
If it succeeds in offering an effective system based on Android, it is likely to become one of the biggest players in the mobile payments market.
Once the NFC technology is rolled out to the UK, consumers are likely to benefit from both cheaper payment charges as well as the convenience of storing cash on their mobile phones.
MoneyHighStreet.com Comment: Paying by mobile phone is very much in its infancy at the moment, but there is a huge benefit for the companies that dominate this market in the future – and it could just as well be a technology company like Google that dominates instead of a traditional credit card company such as Visa.
Expect there to be a scramble to get the most terminals installed, to offer the most secure and low cost mobile based payments, and to provide the widest range of contactless enabled phone devices. This will benefit all of us as it will drive down those insidious credit card charges, particularly for smaller amounts.
Developments with NFC technology could also herald the decline and eventual end of credit cards, though this will take years to happen.