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MOUNTAIN VIEW, Calif. -- Google is launching a smartphone application called Google Wallet that will let consumers use their phones like credit cards, the company announced in a press conference on Thursday. The app, which is set to roll out this summer, marks Google's entry into the heating-up world of mobile payments.
. The mobile payment system works with near field communication (NFC)-capable smartphones, allowing users to wave their phones over a sensor to make a payment. As well as being convenient, NFC mobile payments are more secure than credit card payments due to a higher level of authentication. NFC-enabled smartphones are encrypted and password-protected within the phone.
Google isn't going it alone, either. Citi, MasterCard, First Data and Sprint stood with the company as partners at the press conference.
"Today, we’ve joined with leaders in the industry to build the next generation of mobile commerce," said Stephanie Tilenius, vice president, commerce and payments. "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."
The app is currently being tested and will debut in New York and San Francisco this summer, partnering with businesses such as Subway and Walgreens. Sprint's $200 Nexus S 4G will be the first phone to offer Google Wallet, but Google expects that to change soon. The company stated that it expects smartphone mobile payments to reach nearly $630 billion by 2014.
Google Wallet users will be required to associate the app with a Google account. Google also will provide online coupons for local businesses through Google Offers, which is designed to work seamlessly with Google Wallet.
"We believe the shopping experience hasn't yet been transformed by technology," added Tilenius.
Google Wallet is designed to work with MasterCard's Verifone-powered PayPass network. This means that users can immediately use it to pay at any PayPass-enabled retail location. More than 124,000 merchants use PayPass in the U.S., and more than 311,000 use it worldwide.
Although using a phone to pay for purchases will be a new experience for many consumers, company representatives expressed confidence in mobile payments' advantages. "We think the security is actually a selling point," said Mario Shiliashki, who is in charge of emerging payments at MasterCard. He noted that consumers do not always realize when their credit card has been stolen."But I touch my phone 60 times a day; I'll know immediately if it's gone."
On the same day that Google made its announcement, online payment company PayPal Inc. sued the company in California state court for allegedly misappropriating trade secrets. The lawsuit claims that former PayPal executive Osama Bedier, currently working for Google, stole confidential company information, and that Tilenius, another former PayPal executive, violated contractual obligations when she recruited him.
A spokesman for Google said the company had not yet received a copy of the lawsuit and could not comment.