Who Will Win at Mobile Payments? Google or Square?

This was one heck of a week for mobile payments.

Google unveiled a mobile wallet and deals program that will allow users to tap their Android phone at the register to pay using near field communication (NFC) technology.

At the press conference today, it also said it has built a deal network, much like Groupon, that offers consumers discounts and loyalty programs for local retailers and merchants.

(It was only a tiny bit deflating later in the day when PayPal sued Google and its top two payment execs).

Rewind to earlier this week when Square, the company founded by Twitter creator Jack Dorsey, also announced its mobile payment plans.

On Monday, Dorsey showed Square’s way of replacing wallets without using NFC.

Instead of NFC, users order and pay with an iPhone application, where their credit card information is stored. At checkout, they give their name to the cashier, who will need to use an iPad as a register in order to complete the transaction.

Square also envisions building a local deals network.

Both systems are headed into trials at various locations around the country. Google will be expanding nationwide by summer.

For an industry that seemed so far out in the future just a few days ago, that’s a lot of promises being made in just one week.

Both Google’s Eric Schmidt and Dorsey will be making appearances next week at our D: All Things Digital conference to make the case.

In the meantime, which player–Google or Square–is the likely winner?

Put bluntly, neither system is good enough right now.

Even though it seems certain that as a society we will increasingly move away from cash as a primary method of payment, it will take plenty of experiments–and future iterations–to get it right.

Both Google and Square are plagued with the same problem: Making bets on technology and partners that limit the addressable market.

In doing so, neither is able to a cast a big enough net to have a truly disruptive service.

For instance, Google’s solution works only on NFC-enabled Android smartphones running on the Sprint network (Sprint has only one NFC-enabled phone).

Square is on the opposite end of the hardware spectrum.

Its system requires a consumer to have an iPhone and a merchant to have an iPad. It said Android applications are coming soon.

They’ve also both made alliances on the processing side of the business. Google has partnered with MasterCard, while Square has received an investment from MasterCard’s arch rival, Visa.

Of course, this is the very first inning, and the game is not being played by just two teams, so anything is possible. Many others are jumping in, or planning to, and that will make things even murkier.

Going forward, Google may have the scale and determination to make some of those changes that can bring it to the masses, but it’s unclear what its plans are for non-Android devices. It says it is building an open platform, but how open?

In the meantime, Square’s approach appears to be winning over the hearts of the small- and medium-size businesses that don’t have the capacity to adopt complex point of sales machinery. It also has the ability to be platform agnostic since it does not have a stake in who wins the mobile operating system battle.

Maybe for now, the big winner is the customer, who has plenty of choices to pick from.

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