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Google in mobile payments ménage à trois

MasterCard and Citigroup slip into bed with search giant

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MasterCard and Citigroup will be deploying NFC payment applications into Google's Nexus S phone, with other handsets to follow, as part of the chocolate factory's bid to turn phones into wallets.

The news comes from the Wall Street Journal, which cites the ever-present "people familiar with the matter" as telling the paper that the bank and the payment processor will put mobile payments into Android handsets, with the help of Google. But what the WSJ doesn't say is that if Google is talking to such big players then it is probably not planning to do anything for itself.

That's important, as Google could (in theory) create a payment system based around Google Checkout and deny anyone else access to the hardware, so this news would seem to prove that the search giant has no aspirations of becoming a banking brand.

Near Field Communications uses very-low-power radio to communicate over short range, but to be used for payments the NFC device also needs a secure element where balances and cryptographic keys can be stored. The owner of that secure element controls which payment applications can be installed, and Google owns the secure element embedded in the first NFC capable Android handset, the Nexus S.

That means that Google could decide to create its own payment architecture, based around Google Checkout, and refuse to let anyone else into the handset.

But exclusivity isn't the Google way, and the Nexus S also supports a secure element embedded in the operator's SIM, so there are already alternatives. Google is more interested in gathering information, and will want NFC applications installed in its secure element rather than one owned by the operator to facilitate data collection, so in many ways it would be surprising if the company wasn't talking to MasterCard, Citibank and all the other major players.

Google would love to know just how effective an advertisement was, and tracking physical purchases would be a great way to do that, so the company will be working to encourage payment processors into its own secure module rather than anyone else's.

Whether Apple will adopt such a conciliatory line is debatable. RIM is already facing complaints from Canadian operators who are demanding that BlackBerry handsets support a SIM-based secure element in addition to one embedded by (and under the control of) RIM. Nokia, meanwhile, has taken the operators' side and has not embedded any secure element at all in the C7.

The debate over whether mobile phones will become wallets appears to be over, but the battle over who holds the keys to those wallets has only just begun. ®

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