Google's NFC Payments Push Not Just about Payments

The Wall Street Journal is reporting that Google has joined forces with MasterCard and Citigroup (in addition to POS provider VeriFone) on NFC and mobile payments. This follows up on a Bloomberg story last week about Google and VeriFone launching a limited test of NFC-enabled payments in which Google was paying for the installation of new POS hardware at selected stores:

The company will pay for installation of thousands of special cash-register systems from VeriFone Systems Inc. (PAY) at merchant locations, said one of the people, who requested anonymity because Google’s plans haven’t been made public. The registers would accept payments from mobile phones equipped with so-called near-field-communication technology.

According to the WSJ story, the Google effort is about much more than developing mobile wallets. It's equally about consumer analytics and ad targeting:

The Internet giant is aiming to make mobile payments easier in a bid to boost its advertising business. The planned payment system would allow Google to offer retailers more data about their customers and help them target ads and discount offers to mobile-device users near their stores, these people said. Google isn't expected to get a cut of the transaction fees.

The project, which is in its early stages, would allow holders of Citigroup-issued debit and credit cards to pay for purchases by activating a mobile-payment application developed for one current model and many coming models of Android phones. The idea is to turn the phones into a kind of electronic wallet.

These phone users also would be able to get targeted ads or discount offers, which Google hopes to sell to local merchants. They also could manage credit-card accounts and track spending through an application on their smartphone, the people said.

While advertising or couponing based on consumer purchase history is nothing new in the "offline" world, this "closed loop" capability would raise major privacy concerns simply because Google is involved.

The WSJ cites a Federal Reserve report (citing third party data) that estimates an existing infrastructure of 70 million "contactless devices" (cards) and 150,000 readers in the US. The WSJ report also says that Wal-Mart confirmed that it had discussions with Google about NFC payments but didn't say anything beyond that.

There's lots of jockeying for position right now among carriers, credit card issuers and to a lesser degree hardware makers as everyone tries to line up to get a piece of what is expected to be a very substantial mobile payments market. 

More stories about mobile payments: