If not for your driver's license, you could leave this at home.

Last Thursday, Google introduced Google Wallet, a new application allowing users to make transactions by waving their cellphones, rather than sliding credit cards.  Keyed for phones with the Android operating system, Google Wallet will allow users to pay for items, redeem coupons, and earn loyalty points all in one wave.  However, the application has limited availability currently.  Only consumers with the Samsung Nexus S 4G phone, sold by the nation’s third-largest wireless carrier, Sprint, will be able to use the application this summer.  The Nexus S 4G comes with Android’s latest software, Android 2.3 “Gingerbread,” which supports the native field communications (NFC) wireless technology necessary to run the application and keep users’ credit card safe.  Assuming one uses a Nexus S 4G, a consumer must use either a Citi Mastercard or a Google prepaid Mastercard to wave to pay.  Moreover, while several companies, such as Subway, Bloomingdale’s, and American Eagle, have become early partners in Google’s virtual wallet project, all of the retailers will need to upgrade their payment terminals.  With such limited availability of Google Wallet, will retailers have the incentive to undergo this upgrade?

It seems so.  On the same day as Google’s announcement, PayPal filed suit in a California court, claiming Google stole PayPal’s trade secrets in order to create Google Wallet.  PayPal pleads that it had been developing the technology to provide large retailers with mobile payment capabilities.  PayPal’s complaint states that a PayPal employee with “intimate knowledge” of this development was hired at Google shortly after failed negotiations between the two companies concerning the possibility of PayPal becoming Google’s payment platform.  Google responded that it respects trade secrets and intends to defend itself against the lawsuit, and that “Silicon Valley was built on the ability of individuals to use their knowledge and expertise to seek better employment opportunities, an idea recognized by both California law and public policy.”

With wireless carriers, technology companies, banks, credit card issuers, and payment networks all affected by the Google Wallet technology, PayPal’s immediate fuss about what promises to be a slow-developing revolution is not much ado about nothing.

- Whitney Boshers

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