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Google will soon roll out NFC billing thanks to a partnership with Mastercard and Citigroup. The service will debut on select Gingerbread handsets like the Nexus S. Not all handsets will be supported.  (Source: Great e-Reader)

With NFC you just tap your phone against the billing reader to complete a credit card transaction.  (Source: Tech Taxi)

Apple's iPhone and Research in Motion's Blackberries don't currently support NFC communications or payments. Future models may.  (Source: The iPhone Blog)
Forget your wallet? No problem if you have your phone and license...

Near field communications (NFC) is the kind of wondrous future-tech that promises to bring new convenience to every-day chores like shopping for groceries or fueling up at the pump.  Japanese customers have already been using NFC-enabled cell phones as credit cards for several years.

Now Google, Inc. (GOOG), makers of the world's top smartphone operating system, Android, have announced than NFC will soon arrive for American consumers. 

The announcement was made at the Web 2.0 Summit by Google CEO Eric Schmidt, who will step down as Google's CEO next Monday.  Web 2.0 is an annual internet-aimed conference held annually in San Francisco, Calif. since 2004.  The company had previously expressed interested in NFC payments, but had failed to fully elaborate on how it would execute the billing scheme.

I. Credit Cards on Your Phone

Initially Google has selected two corporate partners in the credit and banking industry -- MasterCard, Inc. (MA) and CitiGroup, Inc. (C).  

CitiGroup claims to be the largest issuer of credit cards in the world with its Citi Cards.  Much of the company's business is outside the U.S.  MasterCard is second to Visa (V) in the U.S., with 171 million credit cards and 123 million debit cards active within the U.S. [source].

As with standard cards, a fee will be charged to businesses.  It's unclear at this point whether the cardholders (customers) themselves will pay any additional periodical or spot fees for the service.

What Google did make clear is that it is not getting a cut of any fees from the card.  

It is offering the service for two reasons.

The first is that it makes an attractive selling point for its smartphones.  Top competitors Apple (AAPL) and Research in Motion (RIM) lack billing service on their popular U.S. models.

Secondly, Google will track your purchases and says it may use them to try to better target ads or discount offers at your phone.  

As traditional advertising begins to fade, targeted advertising is a booming business.  By direct ads that customers might actually care about, for example local sales or sales on items the user typically purchase, the uptake rates are far higher.  Everyone from U.S grocery chains like Kroger, to internet giants like Google, eBay/PayPal, and Facebook are deeply involved in the field.

The dark side of data mining is that more of your information will be stored with the potential for compromise.  While Google and others have engaged in efforts to anonymize data to a degree, advocacy groups and U.S. government officials have expressed concern about data mining and suggested possible legislation to limit its scope.

For now customers choosing to adopt the new Android service, will find themselves jumping deeper into Google's data mining bid.

II. Android Arrival is Imminent

The new service is supported by operating system APIs in Android 2.3 "Gingerbread".  

Gingerbread is Android's latest operating system version, which features user interface refinements, battery life improvements, increased web standards support, and improvements to the OS's copy, cut, and paste routines.

The Software Development Kit for Gingerbread rolled out to developers in December.  Motorola and Samsung appear to have advanced builds of Gingerbread ready for their smart phones whenever carriers decide to throw the switch.  Builds for Motorola's Droid X and Droid 2 and Samsung's Galaxy S smart phones have leaked in recent weeks.

Currently Gingerbread is exclusively available through official channels on Google's Nexus S, which went on sale in December of last year.

NFC requires special hardware, so it's unlikely that phones like the Galaxy S would be able to support the new technology.  For now the Nexus S appears to be consumer's best bet for getting access in the near future.

III. What is NFC and Where Can You Use It?

Near Field Communication relies on an active device (like a key fob or your phone) acting as an active (powered) sender and sending a signal to a passive receiver.  Typically the receiver is located within 4 cm of the sender in order to properly receive the signal.

The technology operates at the 13.56 MHz frequency, well below the frequency band commonly used with Wi-Fi, 2.4 GHz. 

The technology was developed and licensed by Dolby Labs' subsidiary Via Licensing Corp.

Currently one of the largest makers of NFC readers is Verifone Systems, Inc. (PAY).

There are actually thousands of such devices already employed across America.  Examples include checkout devices that you tap your card against and gas pump charge devices you tap a key fob against.  With the new deal, you could theoretically use your compatible Android smart phone with most of these devices.

You may need to have your license ready to present for larger purchases, as with credit cards, to confirm your identity.

A recent Federal Reserve sponsored study [PDF] stated that there were 150,000 NFC readers installed at locations across America.  And the study claimed Americans own 70 million NFC enabled devices -- largely credit cards.

A MasterCard sponsored survey by Edgar, Dunn & Co. suggests mobile payments, the field that NFC billing falls under, will swell to a $618B USD market by 2016.

It's unclear how the device will coexist with the upcoming Isis billing system from Verizon Wireless (VZ), T-Mobile (Deutsche Telecom: DTE), and other players.  It appears, at present, that it will compete with such a system.

While wireless billing will almost certainly land on the iPhone, on Blackberries, and on the Windows Phone 7 platform in the near future, it appears that Google will be the first smart phone OS maker to leverage this fascinating, if a bit scary technology. 

The technology is thought to be relatively secure; it would likely take more effort to steal your card digital via NFC trickery than it would to steal your card information from a corporate database.

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RE: and license?
By Solandri on 3/29/2011 7:36:26 AM , Rating: 2
Heck, in the case of Check ID you're potentially making the criminal work a little harder to produce/buy fake ID

No, Motoman is right. It's the craziest thing, but MasterCard and Visa prohibit merchants from requiring an ID check to accept a credit card. They're allowed to ask, but if you refuse to provide ID, they have to accept the card and let you make the purchase. Any thief who uses stolen cards regularly knows this.

(It's crazy because it's the merchant who has to pay for any fraudulent transactions. If the real owner of the card gets the charges reversed, the merchant is out the money and the merchandise. Despite what the credit card companies make you think, the interest and fees you pay them doesn't actually go to combating fraud. It all comes out of the merchant's pocket. Online credit card transactions are actually safer for the merchant because you have to give them your shipping address, which they can then verify with the credit card company. In retail, the merchant is forced to accept the card with no corroborating info.)

Further, you argue that it somehow makes it harder to dispute the charges. Care to back that claim up with some proof? The only thing the merchant has verified is that the supposed cardholder has an ID that appears to match the name on the card. That doesn't prove anything,

Depends on the system the merchant has set up. Like I said, the credit card processors let you verify certain personal infomration - usually billing address and home phone number. That's why gas stations sometimes ask you to enter your zip code, and some stores ask for your phone number. When they process your card, this additional info gets sent to the credit card processor, gets checked against your billing info, and if it doesn't match it raises a flag which the merchant can then use as grounds for refusing the transaction.

RE: and license?
By Alexvrb on 3/29/2011 8:21:52 PM , Rating: 2
I didn't disagree with the idea that MC and Visa prohibit checking for ID. HE was the one who said that even if they DID check, that they could just forge an ID. That was the scenario I was responding to. Thanks anyway though.

Regarding your second response, what does that have to do with ANYTHING I said? Moto was talking about how "Check ID" would make it harder for you, the consumer, to reverse fraudulent charges. You didn't address that in any way, shape or form. You were talking about things like requesting phone or zip, and that stuff can apply regardless of whether they sign the card or not!

RE: and license?
By The Raven on 3/30/2011 11:37:59 PM , Rating: 2
Motoman is right?
You have a funny way of backing him up.

From your link...
If you want merchants to ask for your ID, sign your card and write “Ask for ID” below your signature (however, merchants are not bound to honor that instruction). If you do not want to show ID, simply sign your card and refuse to provide ID if asked.

Moto is dead wrong according to this.

They prohibit mandatory ID checks, but if you the card holder request it they certainly can check.

This shows that it is indeed an added security measure to write "SEE ID" on the back.

"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg
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