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Google, which makes more than 95% of its revenue from Web advertising, sees a major opportunity to use NFC to help it take advantage of its Web search dominance with physical merchants and advertisers.

With more than 90% of purchases conducted at the physical point of sale in the United States, Google plans to use smartphones, geo-location and NFC technology to stake its claim to what it calls a “new era of commerce” – bringing the online and offline worlds together.

The company unveiled its much-anticipated Google Wallet in late May 2011, planning to launch in New York, San Francisco and other U.S. cities in the summer. Users will be able to tap Google’s Nexus S 4G phones, and later other Android NFC handsets, to pay with a Citi-issued credit application and Google’s own prepaid application, both supporting MasterCard PayPass technology. Other banks and services providers are expected to join later in the initiative, which Google has worked on for many months.

Google would also enable users to “clip” coupons and other offers they find in searches on their phones and by tapping the phones on smart posters to add to the wallet. The offers would also be sent to their phone inboxes. Users could redeem the offers with a “SingleTap,” along with the payment.

To encourage major retail chains to accept contactless payment and couponing, Google is subsidizing terminals. It has already announced major new U.S. merchants to accept contactless stateside, including the Subway sandwich chain, Walgreen retail pharmacies and Macy’s department stores.

The customized couponing service is part of Google Offers, a competitor to deal-of-the-day startup Groupon and underpinning Google’s business case for NFC.

Google plans to make its money not with NFC payment–it won't even charge users to top up its prepaid card–but with targeted advertising and offers. The search giant hopes to cash in on the move to mobile for Web browsing and shopping by consumers, using NFC interactivity and other data it collects on shoppers’ location, buying habits and preferences.

It will control the secure chip in its Nexus S, which stores the payment applications and probably other applications. It remains to be seen whether it can control secure chips in other Android phones and would block other mobile wallets from being loaded onto the phones.

Google was to test the wallet in New York and San Francisco around the time of its late May 2011 announcement and the commercial launch would happen in these and other U.S. cities. It began trialing Google Offers in Portland, Ore, in early June 2011 and plans to expand Offers to New York and San Francisco in the summer.

Google has been talking to other banks in North America and also in Europe to put their payment applications in the wallet, as the Web giant makes its move to capture what former CEO Eric Schmidt has called a “mega-scale opportunity,” for mobile commerce with smartphones, cloud-based apps and NFC.