MasterCard Defends Google Wallet Ahead of Its Official Launch

Google will officially launch its mobile payments service any time now, which will give a small subset of Android smartphone users the ability to tap and pay for items at a limited number of stores.

The launch comes on the heels of PayPal unveiling its competing digital wallet strategy last week in Rancho Palos Verdes, Calif.

PayPal believes it will reach a larger segment of the population faster, because it is not relying on as much technology.

Meanwhile, Google Wallet customers will be restricted to those with a Citi MasterCard (or prepaid card) and an Android-powered Nexus S from Sprint. Additionally, the merchant will have to have a MasterCard PayPass-enabled payment terminal.

PayPal anticipates having at least one major pilot by the end of the year, with a more major rollout slated for April; Google had previously pegged summer for a mobile payments launch.

In an interview, MasterCard’s head of mobile, Mung Ki Woo, defended the search giant’s approach to the market.

He said MasterCard already has 300,000 PayPass-enabled terminals worldwide, of which half are in the U.S. That number is growing, Woo said, but there is still a long way to go to upgrade all 30 million in existence.

Besides eBay-owned PayPal and Google, dozens of companies are rushing into the space, including American Express; Visa; the wireless carriers, through an intiative called ISIS; and start-ups, too, including Square.

But it’s not clear how quickly consumers will flock to change payment technologies, especially near field communication. which, according to some, will take at least three years to become widespread.

“Very much so, yes, we are in favor of NFC,” Woo said. “It’s going to take a little bit of time. Consumers will need to change handsets, but at the same time, they do it quite frequently now. And we also expect the number of locations equipped with PayPass will increase.”

At a recent MasterCard event in New York, the company demonstrated a number of scenarios for mobile payments. One of the examples that resonated best with people, Woo said, involved vending machines. ”They don’t accept credit cards, so they thought this was very cool,” he said.

Other areas of focus are everyday items, like gas, groceries and other necessities, including bus or train tickets, where the headache of standing in a line can be eliminated. Google already allows you to search for businesses in your ZIP code that accept the system. A quick search in Seattle shows a number of nearby fast-food restaurants and pharmacies that will take it.

Woo said that although there may be some lag as the infrastructure gets up to speed, he had two comments on PayPal’s approach to the market.

Last week, PayPal said one of its strategies was to allow people to enter their phone number and PIN at the terminal to pay, which would eliminate the need to carry a phone or a wallet.

Woo said, “It looks like a slow and clunky experience. Today, you can swipe your card; tomorrow, you will have to enter a phone number on the keypad. It seems to be slower than simply tapping your phone.”

Additionally, he wonders how much work the merchant will be required to do on the back end, so that users only have to enter their phone number at the terminal. “PayPass is compatable with existing back-end processes. There’s a real question as to whether, in trying to avoid any change on the front end, you are pushing everything to the back end.”

Another big difference between the two is that PayPal will be making money by charging for payments, whereas Google will be providing the service for free and making money from coupons that are offered to consumers, a la Groupon.

Woo would not say when Google Wallet was launching, though he allowed that “it’s going to be very soon.”

In addition, he said that after the launch, the ecosystem will expand quickly. “You’ll see a lot of merchants coming online, and a lot of announcements.”


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik