Google Wallet Enters Crowded Market, Faces Slow Adoption

Google entered the increasingly-competitive mobile payments market as the search company officially rolls out its new e-wallet service and app.

The Mountain View, Calif.-based company’s product stores credit card information on mobile phones, allowing users to pay for goods and services with a swipe of a phone. Both users and merchants must have equipment with near-field communications, or NFC, technology for Google Wallet to function.

Google Wallet will support just two payment methods at start, Citi MasterCard and a Google pre-paid cards, which anyone with a credit card can fill and use.

With Wallet, Google joins a field of competitors vying for dominance in the emerging mobile payments market. Services and solutions ranging from Square’s system for Apple devices to PayPal to the Isis consortium of mobile carriers and credit card companies now jockey for a piece of a market estimated to be worth $1.13 trillion a year by 2014, according to Gartner.

Google Wallet, however, faces the same limitations preventing wide adoption of mobile payments technology that other rivals contend with. Many solutions, including Google’s, rely on NFC, a relatively new technology dependent on a complicated network of partners to implement. Much of the infrastructure has not been laid in place for services like Google Wallet to scale rapidly yet.

Google Wallet is also being limited initially to the Nexus S on Sprint, accessible only to a sliver of mobile consumers. The app will be released as a downloadable “over the air” update for Sprint wireless customers who own the model.

But the Internet company is laying the groundwork for wider adoption, announcing it is licensing Visa’s payWave technology, which will enable Google Wallet to function at the hundreds of thousands pay terminals equipped with the capability. Google said it is also working on support for Visa, Discover and American Express cards for future software updates.

NFC-enabled credit card terminals are still relatively rare, though credit card giants like Visa and MasterCard have tens of millions of locations worldwide. NFC will need to infiltrate the existing network of merchants, customers, credit card companies and banks in order for mobile payment services like Google’s to reach a broader audience.

However, Google aims to solidify its place when NFC becomes widespread. Google Wallet will not make money based on transactions, like most mobile payments solutions, which may curry favour with businesses. Instead, the service will generate revenue if merchants choose to advertise to Google Wallet customers through AdWords or Google Offers.

Smartphone-based mobile commerce will likely speed up as more NFC-enabled phones are released next year and the payment infrastructure changes to accommodate new devices and technology. Google angles for its position now with a growing set of partners that will allow it to be used any point-of-sale, but it may have to wait until that groundwork is in place to fully gain steam.

This post originally appeared at Mobiledia.

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