By Maria Aspan and Sinead Carew
NEW YORK (Reuters) - Google Inc will take the wraps off a mobile payment system on Thursday that lets consumers pay at checkout with phones instead of cards, a source said, hoping to beat Visa and others to the punch.
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The Internet search and advertising leader will work with MasterCard Inc, the world's second-largest credit and debit card processing network, to launch the system, the source familiar with the matter told Reuters on Tuesday.
Google has teamed with MasterCard and Citigroup Inc to develop the system, the Wall Street Journal reported in March.
It has now signed up retail partners Macy's Inc, American Eagle Outfitters Inc and Subway, though it is unclear if the project will be launched nationwide or just in New York initially, the Journal cited sources as saying Tuesday.
Google invited reporters to attend a "partner event" on Thursday in New York to demonstrate what it called its "latest innovations." It plans to unveil a mobile payments system that will run on the Android operating system and be available on phones from Sprint Nextel Corp, Bloomberg reported on Tuesday.
A source familiar with the matter confirmed Google would launch the program. Citigroup did not respond to requests for comment. Google, Sprint and MasterCard declined comment.
About a decade after they were dreamed up by engineers and marketers, mobile wallets are still far from commonplace in the United States, stymied by industry infighting, consumer tastes and regulatory hurdles.
That has not stopped banks, phone makers and technology companies -- fearful of being left behind -- from trumpeting the concept.
Shoppers abroad, especially in Asia, can already wave cellphones at the check-out counter to pay for everything from groceries to gasoline.
ELBOWING TO THE FRONT
Now, a growing number of mobile operators, banks, technology companies and card processing networks like Visa Inc and MasterCard are vying to gain a foothold in the still-small but high-potential U.S. mobile payments market.
Three of the top U.S. mobile carriers -- AT&T Inc, Verizon Wireless and T-Mobile USA -- are also looking for bank and network partners to launch their Isis mobile payments venture. The companies recently scaled back initial plans to build a new payment processing network that would have competed with dominant industry players Visa and MasterCard.
Since last year, Visa has tested pay-by-phone technology with several large U.S. banks, including Bank of America Corp and Wells Fargo & Co.
"There's room for more than one competitor," said Google Ventures Managing Partner Bill Maris, speaking about the industry in general.
Such services would appeal to consumers if they can help them save money or shorten their time in line at the supermarket check-out, he added.
"The experience of buying things will be better, faster, cheaper," he said.
Details are sketchy, but the Journal reported Google was unlikely to get a cut of transactions, focusing instead on benefiting by helping retailers target ads and discount offers to Android users close to stores.
Currently, credit card companies charge merchants transaction fees. Other players, such as wireless operators AT&T and phone makers from Research In Motion to Apple Inc, are likely to demand a cut of sales.
This puts U.S. retailers in the uncomfortable position of possibly surrendering more margins.
(Additional reporting by Sinead Carew in New York and Alexei Oreskovic in San Francisco; Writing by Edwin Chan; Editing by Gary Hill and Richard Chang)