What is Google Wallet?

Be prepared --Google is getting ready to pick your pocket. Well, not literally. The company is hoping to convince you to trade in your blasé billfold for a digital counterpart called Google Wallet.

A digital wallet is an app on your phone or other mobile device that allows you to store virtual versions of items you would normally find in a physical wallet, like credit cards, bank account information, gift cards, coupons or customer loyalty cards, and even things like event tickets and boarding passes. The information may be stored either on the device itself or in the cloud, and can be used at bricks-and-mortar locations or online. In theory, it frees you up from having to carry around a host of material items, including money. In practice, it may be a little while before you can entirely forgo your tangible wallet.
The Google Wallet concept banks on a couple of spreading technologies, including smartphones and near-field communication (NFC). NFC is a short-range wireless technology that lends your smartphone all sorts of new capabilities.
For instance, you can use an NFC-enabled phone to pay for things, from parking meters and pet supplies to sandwiches and much more. Visit a merchant who's equipped with an NFC checkout system, and with your NFC smartphone you can complete what's called a contactless payment. Tap or wave your phone near the NFC terminal, enter your PIN (personal identification number) and you're done. You don't even need a paper receipt because the store can send an electronic copy directly to your e-mail account.
To get started, you download the Google Wallet app to your smartphone or tablet. Only a smattering of Android mobile devices have NFC as of mid-2013, but by 2014, some experts expect about half of smartphones to ship with NFC chips, and Forrester Research foresees more than a quarter of phones in the US having the technology by 2016 [sources: Technorati, Mobile Payments Today, Chapman].
However, even if your current phone has NFC, your cellular carrier must also enable your device to use NFC with a digital wallet, and most carriers are not doing this. As of June 2013, only Sprint, Virgin Mobile, US Cellular and Metro PCS offered any smartphones that work with Google Wallet and NFC in the U.S. These include devices from Samsung , LG and HTC. The Google Nexus 7 And Google Nexus 10 tablets also allow you to use NFC.
If you don't have a compatible phone and carrier, you can sign up for Google Wallet online. You can basically use the service to speed through checkout at sites all over the Web, as well as for some other non-NFC uses that we'll discuss shortly.
Once you have downloaded the app or signed up online, you can set up Wallet with your credit cards, gift cards, loyalty cards and more so you'll have the option to pay with whatever source you choose. Of course, to use Wallet at all, you need to find stores that actually have the equipment to read the NFC chip in your phone.
Google anticipated this infrastructure problem. Rather than build a proprietary network of terminals, the company made Wallet compatible with MasterCard's PayPass system, which is already available at around 200,000 locations in the U.S. [source: Google]. Major chain stores including Walgreen's, Subway, Jamba Juice, Macy's, Footlocker, Old Navy, American Eagle Outfitters, CVS and Radio Shack are already on board with the Wallet concept and will soon have NFC readers if they don't already.
Quick, painless payments are only one component of Google Wallet. On the next page, you'll discover Google's ultimate plan: to totally replace your analog leather wallet (perhaps to the great relief of cows everywhere).

The Wondrous, All-in-One Wallet

Google isn't charging any money for Wallet's conveniences. Instead, it plans to make money from the app the way it does with its other products -- through advertising revenue. The more Google and its associated retailers know about your spending habits and buying patterns, the more they can offer personalized specials just for your tastes.

The result? You wind up spending more money, which equals more profits for Google and its advertisers.
The company also hopes to stoke spending with its associated Google Offers program. The Offers feature is integrated directly into Wallet, and works a lot like Groupon and Living Social. Each day, you'll see special discounts for products and services in your area.

The benefit to you, the consumer, is the convenience of carrying a single smartphone that could potentially replace the contents of your burgeoning billfold. Google calls this the SingleTap experience. With one tap, you might be able to redeem a 20 percent discount coupon, log loyalty points and, of course, pay for your items.

In theory, Wallet will be far more secure than your legacy wallet and credit card collection. Each Android smartphone has a secure hardware element, which is basically a chip that stores nothing but Wallet's encrypted data. So, although someone who knows your PIN could swipe your phone and make unauthorized payments (much the same as with an ATM card), that person can't access the credit information inside.
If your phone is lost or stolen, you can also log onto your Google Wallet account online and disable the app so that no one can use your phone to make purchases. Additionally, when you pay with Google Wallet, Google issues a temporary MasterCard number that is passed to the merchant in lieu of your actual account information.

Security aside, there's also power to consider. If your phone's battery dies, Wallet, um, doesn't work.
Google Wallet isn't yet mainstream and, by all accounts, it could be 2014 or 2015 before many consumers have even heard of NFC technology. For one, the NFC infrastructure is anything but ubiquitous, meaning most people can't pay with Wallet even if they want to.

And two, Google must fend off competition from the likes of Isis, which is a joint venture from AT&T, Verizon Wireless and T-Mobile. Like Google Wallet, Isis uses NFC technology to turn smartphones into digital wallets. However, as of mid-2013 Isis was still in the testing phases and may have some work to do if it is to catch up with Google's plan.
So can this technology be used in the here and now by someone without an NFC-enabled device?

Using Google Wallet Without NFC

As we've mentioned, many retailers still do not have point-of-sale systems that support NFC-driven digital wallet technology, and most cell phone companies do not offer phones that are set up to allow Google Wallet to work with NFC. Widespread implementation of NFC hit another snag when Apple chose not to include it in the iPhone 5. The technology is only currently available on select Android phones and tablets. So what is a would-be early adopter to do?

For anyone who is intrigued by Google Wallet but doesn't have the equipment, the good news is that Google has devised a few other ways for people to use it until NFC sees wider adoption.
The company rolled out a Google Wallet API that allows online merchants to include a Buy with Google button, which enables customers to make purchases with just a few clicks via their mobile devices and the app. Google has also developed a Google Wallet Instant Buy API that allows integration of Google Wallet into merchants' own Android apps. Both allow for making quick purchases of goods and services without having to enter all of your payment and shipping information many times over on multiple sites and apps.

Google also has a new feature rolling out over 2013 that allows users to send money via Gmail. To virtually "attach" money when you are sending an e-mail, you hover over the file attachment icon (a paperclip) and a few other symbols appear. Among the line of icons is a dollar sign that allows you to send money to someone via your Google Wallet account. The sender can transfer money from his or her Google Wallet balance or bank account for free, or from a credit card for a 2.9-percent transaction fee with a minimum charge of $0.30.

If you don't have Gmail, you can send money from the Google Wallet app on your phone or tablet, or through Google Wallet online. The receiver does not have to have Gmail. Any e-mail address will do. But in order to collect the money, they must sign up for a Google Wallet account. As of summer 2013, only US residents can receive money via Google Wallet.
At one point there was talk of Google offering a physical Google Wallet card for use in place of the app, but that plan has apparently been scrapped [source: Wester].

Some competing digital wallet services will use NFC, but some will use other methods such as a physical card, a personal identification number (PIN) in conjunction with a mobile number, voice recognition or QR code scanning technology. In fact, Google Wallet utilizes QR codes for merchant loyalty programs and special offers.

In a lot of ways, digital wallets -- including Google's ambitious offering -- are not quite ready for prime time. But m-commerce (mobile commerce) is coming, and soon. And when it does, you may be using Google Wallet, or one of its competitors, for everything from your morning doughnuts to your late night takeout.