The History

Of course, while Wallet is Google’s first big push into mobile payments, it is far from the first. Mobile payments have been “the future” of payments for decades now, long before the days of smartphones equipped with NFC (or Near Field Communication ). Early attempts in the 1990s from companies like DigiCash focused not on phones, but on standalone “smart cards,” which promised better security, no transaction fees and more convenience than traditional credit cards – one day we would use them not to just pay for items at a store, but from our home computers as well. E-cash for an e-economy.

With the rapid rise of cellphones, though, came a push for mobile commerce, or “m-commerce,” an effort that really began to pick up steam in the early 2000s when mobile payments were not just the realm of upstarts, but big players like Nokia (which would continue to push its own efforts throughout the decade). Our phones would be the one device we used for everything: they’d open doors, get us on a bus or subway, and let us pay for anything, anywhere. In many ways, that’s still the goal we’re working towards, and one that’s slowly starting to become a reality.

The Launch

The launch of Google Wallet was a typical, modern day tech event. The press assembled on short notice for a presentation filled with slides, demonstrations and much walking back and forth on stage – partners were trotted out, promises were made and lots of questions were left unanswered. The launch event also marked the start of a very slow rollout for the service itself. Just one phone on one carrier was announced at the event – the Sprint Nexus S 4G – and the service launched only in limited trials in New York and San Francisco, with a vague “summer” date given for a broader rollout.

The launch of the service also brought a dispute with PayPal out into the open, with that company filing suit against Google the very day of the event, alleging that former PayPal executive Osama Bedier misappropriated the company’s trade secrets in developing Google Wallet. PayPal further alleged that Stephanie Tilenius, also formerly of PayPal, violated the terms of her contract in recruiting Bedier. Google said it would defend itself against those charges at the time, but little has emerged about the lawsuit since, and PayPal itself is continuing to pursue a number of mobile payment initiatives .

The Devices

In the past year, the lineup of devices supporting Google Wallet has expanded a bit, but not all that much. In addition to the Nexus S, the Sprint Galaxy Nexus, LG Viper and LG Optimus Elite (also available on Sprint’s Virgin Mobile prepaid brand) all support mobile payments with Google Wallet. You can also use the service with an unlocked Galaxy Nexus, albeit only on AT&T and T-Mobile (as Verizon has deemed fit to block it). Key to all of those phones is a built-in NFC chip, which has become the de facto standard for mobile payments in recent years. NFC itself is an extension of RFID technology (Radio-Frequency Identification), which was the basis for a number of earlier mobile payment efforts.

No fewer than 10 Google Wallet-supporting devices in all have been promised for this year – but, again, Sprint remains the sole carrier (more on what the other big carriers are up to later). There was talk from the launch event of expanding the service through NFC stickers that could be attached to any smartphone, but this hasn’t yet panned out.

The Partnerships

While it may be a bit short on carriers and phones, Google has fared a bit better when it comes to partners on the financial and retail sides. It’s teamed up with MasterCard to allow for payments via hundreds of thousands of PayPass terminals at stores across the United States. There’s also no shortage of retailers who have signed on to offer not just mobile payments, but coupons and loyalty credits as well – Walgreens, Toys R Us, Macy’s, The Gap, and Foot Locker, to name a few, with more promised.

Unfortunately, while MasterCard allows the service to be accepted at plenty of retailers, you still need a Citibank MasterCard to get the most out of it. Other cardholders can use the service, but you’ll need to regularly top up your Google Wallet account rather than draw funds directly from your credit card. There’s no word on any further expansion in that area just yet.

The Competition

Google faces a number of challenges on the road to widespread adoption of the service, not the least of which is some increased competition. Its biggest rival by far (at least in the US) is Isis, a joint venture between AT&T, T-Mobile and Verizon that’s challenging Google and Sprint head-on – offering the same contactless payments, coupons and loyalty cards, with an NFC-enabled smartphone handling all of the transactions. Also like Google Wallet, it’s starting out slow, with trials in just two cities this summer (Salt Lake City and Austin), and a limited, but growing, number of credit card partners (currently including Chase, Capital One and American Express). Perhaps its biggest advantage over Google Wallet, though, is the promise of far more supported phones (from virtually all of the big manufacturers, Apple aside) on all three of the aforementioned carriers.

The company would also face several challengers if it intends to compete on an international level. A group of the UK’s biggest carriers are forming their own Isis-like joint venture, Rogers and CIBC recently announced an initiative of their own in Canada, and various other partnerships and solo efforts are starting to sprout up around the globe before Google even gets its foot in the door.

The Future

So what will year two of Google Wallet look like? That’s still very much a guessing game at this point, with Google itself staying relatively mum on any future plans beyond those aforementioned (but still unspecified) new devices and additional retail partners. The Wall Street Journal did recently report that Google may be considering a shift in strategy, however, with it possibly either sharing revenue with carriers in order to bring more on board or even side-stepping the carriers altogether and instead working directly with retailers to manage transactions. What is clear, though, is that this next year will likely be the most interesting time yet for mobile payments – an area that, for all its progress, is still really just beginning to get off the ground.

 engadget