Is Google Wallet Poised to Revolutionize the Customer Experience?

Today at 12:00 PM Google (NASDAQ:GOOG) held a press conference, covered live here on Wall Street Cheat Sheet by yours truly, unveiling the details of its new “groundbreaking technology” Google Wallet. The details of the program were kept highly secretive and have garnered much speculation until the nuts and bolts of the technology and its potential uses were broken down today by Google Representatives.

The presentation, led by Stephanie Titelius and Osama Berein of Google, also featured appearances from representatives of Sprint (NYSE:S), Citigroup (NYSE:C), MasterCard (NYSE:MA), First Data, American Eagle (NYSE:AEO), and other early corporate affiliates of the program. Titelius opened the presentation with ambition, boasting, “We [Google] are about to embark in a new era of commerce, bringing online/offline commerce together.”

What is Google Wallet?

Essentially, Google Wallet will change the face of the customer-vendor transaction by allowing shoppers to pay via their mobile phones. Instead of using a credit card or digging through pockets for change and lose cash at the checkout aisle, customers with Google Wallet will have credit card information stored on their cell phones, and will be able to pay by simply holding their phones against digital scanners next to the cash register. Receipts will also be transmitted digitally, so almost instantaneously following payment the transaction will be registered electronically, processed through normal banking channels, and accounted for via digital receipts that are stored in the customer’s phone “wallet.”

Google Wallet is being released with a flashy sub-feature, “Google Offers,” which will regularly allow customers to check their email, retailer websites, and other outlets for coupons, discounts, and loyalty rewards. Customers are then able to “store” such coupons and discount offers in their accounts, and use them electronically at the checkout aisle through their “Google Wallet” just as if they had clipped them from the newspaper and physically brought them to the store.

How Does Google Wallet Work?

According to Osama Berein, VP of Google Payments, its a simple three step process. 1) Upon purchasing a phone, customers will attach the phone to a unique Google Account (through email), that will give them initial access to the Wallet. 2) After registering an account, the user will select a PIN number that must be entered before the Wallet Application is accessed, or “unlocked.” 3) After choosing a PIN, the user will be directed through a credit card registration process (just like the one at the bank), credit providers signed on with the project are Citi (NYSE:C) and MasterCard (NYSE:MA). Assuming the credit card registration is approved (by a branch manager at a regional bank, who will process the application digitally), the Wallet will be accessible and ready for use.

Security Concerns:

Upon first consideration, using your phone as a wallet seems like pretty risky business. Phones are lost, broken, and stolen, all the time, especially as the mobile technology stored on them continues to appreciate in value. Couldn’t someone just take a phone and go on a shopping spree on its credit account? At least if they stole a credit card it would have a name on it and you could call and cancel…you can’t cancel a phone. What about more sophisticated methods of digital information theft, and hackers etc.?

In response to these concerns, Google Wallet Co-Chief Engineer Rob von Barron claimed that the Google Wallet would be “safer” than a normal wallet. According to von Barron, this is because in order to access or “open” the wallet, you will first need to enter a PIN code (like the one for your credit card) that only you will know. Once the wallet is open, you will have to enter another unique pin-code or password to ready it for payment. This dual layer of security, combined with technology built into the “wallet chip” that will assign a unique registration signature to each phone, should make the wallet extremely safe to use.

Currently the service is only offered on Google Nexus 4 Smartphones, though Sprint (NYSE:S) hopes to make the technology compatible with Android and other popular phones in the coming months. Major retailers American Eagle (NYSE:AEO), Macy’s (NYSE:M), fast-food chain Subway, and Walgreens (NYSE:WAG) stores are among the biggest name companies signed on to participate by offering digital payment options at retail locations. The digital payment devices will operate on MasterCards (NYSE:MA) “pay-pass” systems, which are currently installed and ready to operate at 124,000 locations nationwide.

Google (NASDAQ:GOOG) plans to begin field testing its digital wallet in New York and San Francisco this summer, and hopes to make the service publicly available by year end.

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