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Google teams with Mastercard and Citigroup for NFC testing

google_logoNear field communication is one of those up-and-coming “science fiction made real” concepts that promises to add yet another level of functionality to your smartphone in the form of a digital wallet. Essentially, you bring your NFC-equipped phone along on a shopping trip and use it as a sort of credit card.

Google‘s Nexus S is one of the handful of phones already set up with NFC functionality and, as we learned earlier this month, the company is planning to roll out tests soon in New York City and San Francisco. Now there’s word from The Wall Street Journal that Google has teamed with Citigroup Inc. and MasterCard in this endeavor, marking a major first step in what will inevitably be a widespread rollout for NFC technology on Android-powered phones.

The contact-less payment system will be implemented on Google devices that support the technology, with an application that links to Citigroup-issued debit and credit cards. Payments made in this manner will be handled by Google as a third-party entity, with payment, purchase and shipping data being coordinated by the company and sent along to the seller. It is similar to the role that PayPal plays, though unlike the online service, Google will also have access to each users shopping cart. The goal in that is to use the data in working with retailers to issue targeted ads and promotion directly to mobile phones.

The NFC testing will work in stores equipped with credit card readers from VeriFone Systems Inc., as was previously reported. Paying for a purchase with an NFC-equipped phone is as simple as waving or tapping your device against a supported reader. This is a concern for some consumers, due to worries that personal financial data is rendered unsafe by what amounts to a wireless transfer, but sources say that this new system actually offer more security than a traditional credit card.

“Because it’s contact-less there’s a perception people can grab it from thin air, but it’s actually a more sophisticated technology than credit cards with a magnetic stripe, making it more difficult to steal a consumer’s payment information,” Yankee Group mobile transactions analyst Nick Holland told WSJ.

There is also some potential for concern in the way the technology will be used to pair consumers with ads and promotions that might appeal to them. Google won’t take a cut of NFC transactions, but the advantages of having access to a consumer’s digital shopping cart information — and being able to use that information in partnership with any number of retailers — offer other potential avenues of income to justify the company’s role as a third-party middleman.