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Google Wallet Ruffles Some Feathers in Move to Cloud

Marcia Frellick

August 3, 2012

Google Wallet took a big step toward mass adoption this week, but it may have stepped on some big toes in the process.

On Wednesday, Google, which had enabled payments only by Citi MasterCard and a Google-branded prepaid card since its launch nearly a year ago, made this announcement: “Today we’re releasing a new, cloud-based version of the Google Wallet app that supports all credit and debit cards from Visa, MasterCard, American Express and Discover.”

But apparently this was news to American Express, which countered that it never agreed to the deal.

A few more hoops
American Express spokesperson Bradley Minor told PCMag: “We want to make sure Google’s mobile wallet product meets the standards we set for our cardmembers in terms of the transparency and clarity about transaction detail. And right now, American Express does not have an agreement with Google for our cards to be used in the Google mobile wallet.”

Following AmEx’s denial, Google backtracked and rephrased the relationship in a statement: “We are in active discussions with American Express and look forward to working together as partners as the world embraces digital payments.”

The lack of an agreement doesn’t mean you can’t use an American Express card with the Wallet app. You can, but without an agreement, users may be on shaky ground. Minor told AllThingsD that it could shut off the feature at any time if necessary.

Changes opened up wider network
The wallet’s expansion to other major credit card networks came after Google made some key changes. First was simplifying the transaction process. Until this week, payment information was stored inside phones, and each transaction meant getting permission from mobile carriers, banks and credit card companies. By moving storage to the cloud, Google can charge credit or debit cards directly and make the transition easier for banks.

It also added two major security upgrades. One is that actual payment card numbers are no longer stored on the phone itself, but are instead stored on Google’s secure servers in the cloud. A virtual credit card number is stored on your phone. The second is remote locking and disabling of Google Wallet. If you lose your phone, you can lock the Wallet app remotely. Once your account is locked, thieves can’t make transactions.

Some barriers to adoption
One thing hasn’t changed, though — you still have to have a near-field communication (NFC)-enabled phone or Nexus 7 tablet to use Google Wallet. NFC is the technology that allows a payment device (in this case, a phone) to communicate with a payment terminal. So far, only Sprint and Sprint subsidiary Virgin Mobile support it. Between both carriers, only six handsets are compatible.

This could put Google at a disadvantage when Isis, a joint venture by AT&T, T-Mobile and Verizon Wireless, launches its NFC wallet — with all the card companies already on board. Isis’ wallet is reportedly set to launch Aug. 20 in test cities of Austin, Texas, and Salt Lake City.

The slow-moving mobile wallet market may also get a boost from Apple within months. There has been much speculation that this year’s new iPhone will be NFC-enabled when it debuts later this year.