Web giant Google has unveiled its plans for NFC mobile payments via the handset and promptly got itself into hot water. It’s PayPal that has taken issue with Google Wallet, and small wonder, given that the two people heading up the initiative used to work for the payments firm.

James Middleton

May 27, 2011

4 Min Read
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Web giant Google has unveiled its plans for NFC mobile payments via the handset and promptly got itself into hot water. PayPal has taken issue with Google Wallet, and small wonder, given that the two people heading up the initiative used to work for the payments firm.

At the moment, Google Wallet is in the field trial phase and won’t become a commercial reality until later in the summer. At that point it will be supported by the Nexus S 4G (WiMAX) handset on the Sprint network in the US, with the 3G version of the Nexus S, also sporting an NFC chip, expected to follow soon after.

Citi, MasterCard and First Data are the launch partners, supporting two payment solutions: a PayPass eligible Citi MasterCard and a virtual Google Prepaid card. Most people who already have a PayPass eligible Citi MasterCard can simply add it to Google Wallet over the air, using First Data’s service. Or, the Google Prepaid card can be funded with any payment card.

The retail side will be based on the MasterCard PayPass network—a merchant point of sale service covering more than 124,000 PayPass-enabled merchants nationally and more than 311,000 globally. The first Google Wallet field tests are focused in New York and San Francisco, where many retailers, Coca-Cola vending machines and even taxis are PayPass-enabled, including major outlets such as CVS, Jack in the Box, Sports Authority and Sunoco.

Google, naturally, will also be involved in the delivery of relevant deals, promotions and loyalty rewards as it steps up its presence in the buoyant coupons and vouchers space.

Stephanie Tilenius, vice president, commerce and payments, Google, said: “With Citi, MasterCard, First Data and Sprint we’re building an open commerce ecosystem that for the first time will make it possible for you to pay with an NFC wallet and redeem consumer promotions all in one tap, while shopping offline.”

Yet just minutes after the announcement, Google was hit with a lawsuit from PayPal and parent eBay, over the misappropriation of trade secrets. Tilenius was named in the suit, having worked for PayPal/eBay between 2001 and 2009, largely in the field of payment services. Another Google employee named as a defendant was Osama Bedier, who worked for PayPal from 2002 to January of this year as VP of mobileand was allegedly poached by Tilenius in violation of a contract she signed, pledging not to solicit PayPal employees.

That Tilenius did the alleged poaching via Facebook probably doesn’t help her defence either. In the lawsuit, PayPal claims that in July 2010, Tilenius initiated contact with Bedier through a message on Facebook, writing: “I heard from a little birdie that you might be open to bigger and better challenges, I have a HUGE opportunity for you, would love to chat if you are interested.”

The legal waters are further muddied by PayPal’s claim that between 2008 and 2011, Google and PayPal were “negotiating a commercial deal where PayPal would serve as a payment option for mobile app purchases on Google’s Android Market.” Apparently, during that time, PayPal provided Google with an extensive education in mobile payments and the crux of PayPal’s complaint is that prior to his departure, Bedier allegedly met with Android founder and SVP of mobile at Google, Andy Rubin, not to talk about what PayPal could do with Google going forward, but rather how Bedier could help Google compete against PayPal.

As Fred Huet, managing director of Greenwich Consulting points out: “This is potentially about much more than mobile payments. The frontiers between m-commerce and e-commerce are blurring, becoming encompassed in what we call ‘digital money’ where a digital wallet is accessed through many different channels… and this could indeed be the start of ‘digital money.’”

Currently, Samsung, Nokia and RIM have or are planning to implement NFC in future devices. The fact that large retailers such as Subway and Toys ‘R Us have signed up to the scheme in the US may signal that something similar could be on the way to the UK, Huet said.

In terms of deployment, Google Wallet is engineered to enable secure payments and goes beyond what’s possible with traditional wallets and cards. It will require an app-specific PIN and in the first release, all payment card credentials will be encrypted and stored on a chip, called the secure element, that is separate from the Android device memory and is only accessible by authorised programs.

About the Author(s)

James Middleton

James Middleton is managing editor of telecoms.com | Follow him @telecomsjames

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