PayPal: Google Stole Our Ideas for Google Wallet

It was only Thursday that Google (NASDAQ:GOOG) unveiled the revolutionary new Google Wallet, a tap-to-pay system for smartphones meant to replace credit cards, coupons, and receipts. And here it is Friday and they are already involved in a sordid legal mess. eBay’s (NASDAQ:EBAY) PayPal has accused Google of intellectual property theft by means of Osama Bedier, Google’s new vice president of payments, who has spent the last nine years working for PayPal.

According to PayPal, Bedier uploaded their mobile payment strategy to his personal computer before leaving the company four months ago. Also on PayPal’s list of people to blame is Stephanie Tilenius, who left PayPal to work at Google in 2009 and recruited Bedier to do the same. Tilenius is Google’s vice president of commerce who, alongside Bedier, appeared at the New York launch of “Google Wallet” in a promotional capacity.

Google (NASDAQ:GOOG) isn’t making any comments until they’ve carefully reviewed the charges against them. According to the lawsuit, luring Bedier away from PayPal was clearly very important for Google, considering both then-CEO Eric Schmidt and co-founder Larry Page both met with him last fall. (See “Here’s Why Google’s Eric Schmidt Was Not A Flawless CEO“)

Google officially offered Bedier the job on November 12, only 3 days before Schmidt appeared at a technology conference where the first plans for what would later be known as Google Wallet were introduced. But while PayPal may be the only company with a real claim against Google, a lot of companies would probably like to see Google Wallet crippled. PayPal and Google weren’t the only ones to have an idea for this sort of phone payment system–cellphone companies and credit card issuer. Visa Inc. (NYSE:V) has been trying to get a piece of the action linking phones, wireless carriers, and banks in a new payment system.

Google’s (NASDAQ:GOOG) product has the potential to make them a lot of money if it is successful.  Profit comes from advertising that is unveiled to the shopper while at the store and most receptive to coupons and discounts. Google Wallet will remove any stigma currently attached to coupon-clipping, allowing a great range of deals, however small, to be exposed to a consumer ready to utilize them.

But assuming moves past their current hurdles unscathed, they still have a long way to go. First of all, Google Wallet will initially only work on Google Nexus S 4G phone carried by Sprint Nextel (NYSE:S).  That will have to change if Google wants to see their system used on any grand scale. The next is getting retailers to invest in the MasterCard (NYSE:MA) PayPass terminals that are the exclusive interfaces of Google Wallet. Next Google will have to get more wireless carriers to use the system, no mean task considering that three of the nation’s top four carriers — AT&T (NYSE:T), T-Mobile, and Verizon (NYSE:VZ) — are all currently working together to create a wallet to compete with Google’s.

Google’s (NASDAQ:GOOG) final task will be convincing consumers to use the system that in a demonstration Thursday didn’t seem to significantly speed up checkout. And if Google can’t expand its partnership to encompass more credit card companies and wireless carriers, Google Wallet will be dead in the water; it is unlikely many people would be willing to switch from their current carriers or cards in order to use Google Wallet, a system that is more revolutionary in its potential to make money for the company than for what it can do for the customer.

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