Citi and MasterCard to Launch NFC Payment on Google’s Nexus S

Citigroup and MasterCard Worldwide will soon announce an NFC mobile-payment service in the United States with Google–with plans calling for Citi to issue a prepaid MasterCard PayPass application to be loaded onto Google’s Nexus S and perhaps other Android phones, NFC Times has learned.

The initiative, expected to be announced next week, will put the Citi-issued PayPass application inside Google’s new mobile wallet, where it will be stored on the embedded secure chip in the Nexus S, said sources. Google is expected to have overall control of the secure chip, said the sources. Large U.S.-based processor and merchant acquirer First Data will also work on the project, including providing trusted service management. The actual launch of the service might not happen until next fall.

Google will offer some additional applications related to the retail-shopping experience. It is unclear the type of mobile-commerce apps Google plans for the launch, but the Web giant is known to be working on apps for targeted offers and advertising that could reach consumers on their Android phones when they are at or near the physical point of sale. Some of the applications are expected to enable users to tap their Nexus S handsets on smart posters to download coupons or other offers.

Google is also expected to subsidize point-of-sale terminals for large merchants as part of this and forthcoming launches with other banks or payment service providers.

Google is talking to other banks in North America and Europe, with trials or commercial launches expected this year, said source. It’s not clear whether the launch with Citi and MasterCard will start off as a trial or a commercial launch. One source put the launch date after September of this year.

MasterCard and Citi declined comment. A spokespersons at Google was not immediately available. NFC Times first reported that Google was building a mobile wallet and that is was attracting interest from Citi and MasterCard in January. 

Consumers would be able to tap their Nexus S phones wherever PayPass is accepted, which is more than 100,000 locations in the United States. All told, MasterCard has said there are more than 300,000 terminals supporting PayPass worldwide.

The project and others like it expected from Google have the power to shape the coming landscape for mobile payment. It will be the first test of Google’s mobile-wallet software, which is expected to come as a standard app on the home screens of future Android NFC phones. It will also be the first deployment of Google’s m-commerce services.

Moreover, no mobile operator is believed to be directly involved in the project to put a Citi-issued PayPass application on the Nexus S. That puts the project in direct competition with the new business model of the Isis joint venture, made up of AT&T, Verizon Wireless and T-Mobile USA, which plans to charge fees to banks and other service providers to access the secure elements on the NFC phones the telcos distribute.

“Whether that’s the SIM or embedded (chip), it’s ultimately the carriers that buy the devices and have control of the secure element,” Jaymee Johnson, head of marketing for Isis, told NFC Times. He said the Nexus S could be an exception because it is sold outside of the carriers' regular distribution channels. Johnson added that he has no direct knowledge of Google's plans.

Google, probably along with Citi, is expected to have a strategy to get more Nexus S NFC phones into the hands of Citi customers. Google put the first Nexus S phone on sale in December, a 3G version for customers of mobile operator T-Mobile USA. A version with 4G speeds for customers of Sprint became available in stores only this month.

So, there are perhaps a few hundred thousand Nexus S phones in the hands of consumers at present, according to some estimates. Other Android NFC phones planned for the market this year also could be used for the payment service with Citi and MasterCard, though it’s unclear who would control the secure chips in these phones.

Google commissioned Samsung Electronics to build the Nexus S, but other Android phones from Samsung and other handset makers will not come directly from Google.

Code in Google’s latest version of the Android operating system, however, appears to reserve access to the secure chip only to Google, according to an Austria-based NFC researcher, Michael Roland, research associate at the Upper Austria University of Applied Sciences. It remains to be seen whether this would enable Google to control other embedded chips in other Android phones.

The launch of mobile payment by Citi, one of the largest banks in the United States, on the Google platform, could represent yet another blow to Isis, which had planned to launch its own mobile-payment scheme before abandoning the idea. Isis now is seeking to reassure the m-payment industry that it is still relevant and has recast its role as a “delivery engine” for payment and mobile-commerce applications.

It’s possible that Citi and MasterCard also will be a part of the Isis mobile wallet. MasterCard has said it would be willing to have PayPass loaded onto embedded secure chips, SIM cards or even microSD cards in NFC phones, as long as they pass certification. At least two of the three Isis telcos, AT&T and T-Mobile, plan to host applications on the SIM cards they issue.

Isis’ Johnson confirmed the joint venture is talking to large U.S. banks and some of them would be part of a pair of Isis trials planned for next year and probably also commercial launches after that.

“We plan to come to market with multiple banks and those banks will be big players,” Johnson said, though declining to name the banks.

But the plans by Google to enable the launch of a Citi-issued MasterCard PayPass application on its Nexus S phone could be the first shot in what some observers expect to become a wallet war between phone or mobile operating system suppliers and mobile operators.

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