Smartphones may soon replace credit cards. Google Inc. has unveiled a new application that will enable users worldwide to use their Android smartphones to pay for products at hundreds of thousands of retail stores worldwide. Google Wallet, which will launch this summer, will essentially turn a person’s mobile phone into a digital credit card. Big cellphone makers including Nokia, Apple, and Research in Motion are reported to be rushing to roll out new handsets that will allow consumers to pay for groceries, subway passes and restaurant meals by simply waving their phones over a digital sensor. Google sees Google Wallet as the wave of the future; it estimates that by 2014 purchases made on mobile phones will total nearly $630 billion.
"I see this as a natural progression to replacing cash over the long term," said Craig Ochikubo, a vice president at Broadcom Corp., the Irvine chip maker that supplies components to Apple, Google and Nokia. "At some point we're going to say, 'Remember the days when we carried paper in our pocket?'"
Of course the idea that anyone could just take someone’s phone and start scanning purchases with it has become something of a concern to consumers but after more than a decade of development and testing, even card companies are saying wireless payments may be more secure than using a traditional credit card.
"We think the security is actually a selling point," said Mario Shiliashki, who is in charge of emerging payments at MasterCard. He said, a lost credit card can go unnoticed for many hours giving thieves plenty of time to make unauthorized transactions, "But I touch my phone 60 times a day," Shiliashki said. "I'll know immediately if it's gone.” A special pin will be needed to make purchases and sensitive credit card information will be stored in a hardware vault embedded in the phone so it would be hard for people to get your number even if the phone is stolen. As with plastic cards, consumers will be able to cancel digital versions right away and can activate a new phone almost immediately.
The first phone to offer Google Wallet will be the Nexus S 4G from Sprint which runs about $200. Though only a few smartphones on the market have NFC capabilities, NFC-enabled phones are rumored to be in development by Apple, HTC and Motorola. Nokia handsets have had the capability for some time.
Google said its Wallet system would work at more than 120,000 MasterCard "PayPass" locations around the U.S. and will initially be rolled out at stores including Subway, Macy's, Walgreens, American Eagle and Toys R Us.
As always, stay tuned to Credit Cards Professor for more news and updates.
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