With the launch of Google Wallet in September, contactless mobile phone payments are finally available in the United States. Despite its hype, this technology won't be replacing your wallet anytime soon. But its convenience, ease of coupon redemption and receipt storage, and promise of more uses to come mean you should still consider it for your next mobile phone -- or maybe even the one you already have.
Rather than type in a mobile payment text (SMS) message or pull a credit card out of a wallet, shoppers using Google Wallet can wave their phones near a MasterCard PayPass device or other near field communications (NFC) receiver at the checkout counter. The device receives the signal and charges the correct amount to the shopper's credit card, or a virtual prepaid Google card.
You can use Google Wallet today if you have a Samsung Nexus S 4G mobile phone on the Sprint network, and it works at any of the 140,000 PayPass receivers at cash registers in the United States and the 200,000 more in the rest of the world. Many more options will appear soon, both from Google and from Isis, a formidable joint venture of Verizon, AT&T and T-Mobile. Here are seven reasons why it's time to give this technology a serious look:
1. It's more secure than a plastic credit card. If you lose a plastic credit card, a thief can easily use it to make purchases. Google Wallet requires you to enter a personal identification number (PIN) and locks if the wrong one is entered five times, according to Google representative Nate Tyler. And the odds of a third party hacking into that wireless signal are small. "It will only work within three to five centimeters," Tyler says. That's a maximum distance of less than two inches.
2. Special offers are redeemed automatically. Participating merchants can use Google Wallet to offer special deals to users via Google Offers, the company's deal-offering site. The nice thing about it is you don't have to do anything. Andrew Schrage, editor of the personal finance blog MoneyCrashers, was pleasantly surprised that when he waved his smartphone to make a purchase at a CVS store, it offered him a discount automatically. "It recognized me as a CVS customer," he says.
More ways of redeeming offers are on the way. "If you get a coupon in an email, you'll be able to clip it and save it to your mobile wallet," says MasterCard's Vice President of Emerging Payment in the United States Mario Shiliashki. "You'll be able to receive coupons by text message or by scanning quick response (QR) codes with your phone's camera. And we're working with Google to deploy smart posters with NFC tags in them, where you can get a coupon by tapping your phone on the poster."
3. It's easy to track your spending. The Google Wallet app keeps an ongoing record of your expenses that you can check from the app any time, though it may take a little while for full details to show up. "When the transactions first took place they said 'PayPass Merchant' or something similar," reports Derek Aitken, a Google Wallet user in San Francisco. "By the next time I checked, about a day later, it had listed the name of the shop and offered a Google Maps link to the location." Google Wallet also automatically stores your receipts.
4. It's quicker than a card -- when it works correctly. "I've probably used it 20 times, and it didn't work about three or four of them," Schrage says. When it did work, he says, the experience was enough of a convenience to keep him coming back. "I want to use it more down the road," he says. If you do hit a snag, he adds, don't expect much help from the cashier. "The times it didn't work, they weren't able to troubleshoot," he says. But he's confident that the service, which is just a few weeks old, will become more reliable as it gets better established.
5. You can use a prepaid card to control spending and avoid credit card interest. With Google's prepaid card, you don't have to run up credit card debt, and you can limit your contactless spending potential if you want to. And you may want to. "A credit card is a buffer between you and the money you're spending," says Kit Yarrow, consumer psychologist at Golden Gate University in San Francisco. "Many studies show that people spend more freely when they use credit cards than when they use cash. Mobile phone contactless payments can be even more dangerous because they're more of a buffer, and people will be able to purchase even more quickly. The longer it takes to buy something, the better the chance that you'll avoid an impulse purchase."
6. You may not have to buy a new phone. Many current smartphones models -- and most to be sold in the future -- are already equipped with NFC technology, and should work with Google Wallet or other contactless systems as they are launched and expanded. But what if you don't have an NFC-enabled phone and still have lots of time left on your contract? You may soon be able to retrofit your existing phone with contactless payment technology, if it has a slot for an external storage card or "smart card." Tyfone is one of several companies developing micro SD cards with NFC capability built in. "It will all happen within the next 12 months," says Siva Narendra, president of Tyfone.
The big exception is the iPhone: Currently available iPhones have neither built-in NFC nor card slots. But the iPhone 5 is widely expected to arrive sometime in 2012 and be NFC-enabled.
7. Many more uses are coming. Replacing credit cards is just the beginning. In time, Google Wallet may be able to store everything from gift cards to event tickets to boarding passes -- it might even act as your car key.
"We can imagine a day when you walk into a store and tap your phone to a poster to let the retail staff know you're there. They can look up your buying history and offer personalized service," Shiliashki says. "Or you could tap on a tag to get detailed information about a product. We're improving the entire shopping experience, not just the payment portion."