The smartphone is slowly becoming the "all-in-one" gadget, however one big gap that still exists is the inability to easily make purchases directly through the device instead of using cash or credit cards. According to the WSJ  and "people familiar with the matter", Google is working with MasterCard and Citigroup to fill this void by using the still nascent NFC (near field  communication) technology to develop a new mobile payment service.

Customers using Citigroup cards will be able to activate an app developed specifically for NFC enabled Android smartphones. This app will allow users to pay for their purchases by waving their NFC enabled Android smartphone over a contact-less reader. As we reported earlier,  Google will be working with VeriFone Systems to purchase and install these readers at various locations around New York and San Francisco.

According to the WSJ, the new payment service will also provide retailers with more data about their customers enabling them to target ads and provide discounts, offers, and other services when these prospective customers are near their stores. Google would naturally profit from these ads, but apparently not directly from the sales made by the merchants. Although, such monitoring would come with some benefits, such as credit card account information, this method of targeting ads could seriously breach the privacy of customers. Consider the scenario where you would like to purchase an item *ahem* discreetly. Would you be able to remain anonymous using Google's new contact-less payment service?

However, analysts are reporting that generally the NFC technology actually makes it "more difficult to steal a consumer's payment information." Indeed the technology is "more sophisticated...than credit cards with a magnetic stripe." So, you can remain comforted by the knowledge that only Google will be able to see your purchases.

In any case, we are a long way away from contact-less payment becoming the norm. The NFC technology is still quite new and there are only a handful of devices that are equipped to support it, including the Nexus S and the Samsung Galaxy S II. Before this service can really take off, hardware manufacturers will need to start developing smartphones with the technology built-in.

Furthermore, with Verizon, AT&T, and T-Mobile already teaming up to create a competing mobile payment service and Apple and  BlackBerry likely to soon have their fingers in the pie, Google will have a tough road ahead to convince retailers to use their service exclusively. But, having MasterCard and Citigroup on-board ought to place them ahead of the pack. Apparently, Google has also been in early talks with Wal-Mart to include the payment service at their stores.

Source: Wall Street Journal