Google Wallet launched, already running into major issues

In a much-anticipated move, Google on Thursday finally unveiled its free mobile application that seeks to turn smartphones into a replacement for credit cards.

With financial partners Citibank, MasterCard, First Data and Sprint as service providers, the internet giant announced “Google Wallet”.

Google says the new application is still being field tested and should be available by Summer in the US.

Google Wallet will apparently work with Google’s Nexus S 4G smartphone. The technology will work by taking advantage of near-field communication (NFC) chips in the Nexus S. This will allow users of Google Wallet to merely tap, swipe or wave their smartphone at a shop’s checkout point. One would simply “tap-and-pay”.

It was also announced that more than 124 000 retail points in the US and more than 311 000 worldwide would accept Google Wallet by the time it goes live.

In terms of international rollout, Google Vice President Stephanie Tilenius said: “We are looking at expanding internationally, Europe first and then Asia.”

She went on to describe Google Wallet as the “next generation of mobile commerce”.

While tap-and-pay mobile technology is not a new technology, it is being tested in a number of countries, including France and Germany. Up till Google Wallet was announced, the only tap-and-pay system in the US was a joint venture between US mobile phone service providers AT&T, T-Mobile USA and Verizon Wireless, Isis, which was only due to start its pilot early in mid-2012.

But despite being not even a day old, Google Wallet is already facing major issues.

PayPal Lawsuit

Hours after Google’s announcement, Paypal filed intent to sue the California-based internet giant over its new service.

Paypal contends that its former executive, Osama Bedier, who moved to Google in January of this year to become the Vice President of Payments, passed on trade secrets to Google.

The crux of the company’s suit revolves around the fact that for three years PayPal sought to create a tap-and-pay system for Android phones, only for Google to swoop in and claim the victory.

In court papers PayPal writes:

“By hiring Bedier, with his trade-secret knowledge of PayPal’s plans and understanding of Google’s weaknesses as viewed by the industry leader, Google bought the most comprehensive and sophisticated critique of its own problems available.Google put Bedier in charge of its mobile payment business, virtually ensuring that Bedier would misappropriate PayPal’s trade secrets concerning planning and competitive assessments in mobile payment.”

Privacy Concerns
However even if Google is able to come to some sort of conclusion on the PayPal issue, its largest issue still remains consumer adoption of the technology.

An analyst from Forrester Research, Charles Golvin, felt that it remained to be seen whether Google could change consumer payment behaviour.

Andrew Eisner, Director of Community and Content at Retrevo, agreed with Golvin that “the big question is how consumers will warm up to NFC”.

“So far it looks like consumers are a bit skeptical”, Eisner said. “They worry about security and privacy issues.”

Google, however, said it had built a number of security systems into the new Wallet, including the need for a PIN number and credit card encryption. If lost, the payment system can be disabled with a phone call.



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