How Google Plans to Transform Mobile Payments

Do consumers want credit card information stored on a SIM card controlled by a wireless carrier, or are they comfortable with a new near-field communication (NFC) technology as an alternative? Google (NASDAQ: GOOG) has positioned the technology necessary to make the latter option a reality. With last week’s unveiling of the latest updates to the Android operating system, which is now powered by Google’s KitKat on Nexus 5 smartphones, the tech giant has drawn the line in the sand in a quest for dominance in the mobile payments marketplace. As you know, all mobile payment information was previously stored on individual SIM cards within phones controlled by wireless carriers. This meant that all security protocols were attached to the SIM cards as well. As a result, they were subject to fees from the mobile service providers. Even though this security element is viewed as safe by the industry, many consumers are nervous about how secure the technology really is. Because consumers as a whole have been slow to adopt mobile payment technologies, some analysts have expressed worries about the future of mobile payments. The new system that Google has developed eliminates the need to store card and other account credentials in the phone on a SIM card. Not only could Google’s new version of host card emulation technology provide a boost for Google Wallet, which has been floundering since its inception, but it would also allow many merchants the flexibility to adopt NFC payment programs at a lower cost. “If Google can just demonstrate [NFC’s] value, merchants may start to adopt it,” Henry Helgeson, chief executive of Boston-based Merchant Warehouse, told Digital Transactions. Google has previously struggled within the mobile payment marketplace, due to a refusal to pay cellular providers the exorbitant fees they request to load payment credentials. However, with its new system’s ability to lower costs on merchants' implementation of mobile payment technology – along with making the process easier for consumers to use – new life could be breathed into Google Wallet. Now that the illusion of control is being taken away from industry giants – namely AT&T, Verizon Wireless, and T-Mobile – the next question is, “What will the repercussions be?” Will the simplified NFC drive enough new interest to even garner a reaction? Often, when new options of this kind emerge, they are initially met with significant backlash. However, all systems must evolve and this may be the next evolution that mobile payment systems need. Consumers gain added convenience and reliability and retailers gain affordable technology that is easy to implement. Can mobile providers adapt and let go of control in order to benefit all parties involved? The next few months will tell the tale.

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