Google set to introduce alternative to credit cards

Google is planning to launch an "electronic wallet" that will allow users of its Android phones to use their device to make payments as an alternative to using a credit card.

The technology giant is making its move into the nascent market for mobile payments in partnership with MasterCard and the US bank Citigroup, and will announce details at a media event in New York today.

New Android phones will be fitted with so-called near-field communications (NFC) technology, which means they can communicate wirelessly with readers at checkouts. Advocates say the technology will speed up queues and will also give retailers access to more information about their customers, which can then be used to offer discounts and loyalty schemes.

Banks, telecoms companies and the major payment-processing companies – MasterCard, Visa and American Express – have all been examining ways to use the new technology, but have found it hard to agree how to split the fees that they will charge merchants. With Android now the fastest-growing operating system for smartphones, Google's intervention has the potential to galvanise the market, though the company is likely to be cautious in its promises for the technology today. NFC chips are embedded so far only in the Nexus S phone and initially retailers could be limited to New York and San Francisco.

Reports suggest that, behind the scenes, the e-wallet is expected to consist of a MasterCard credit card account and a prepaid Google MasterCard. Google may not take a cut of sales made using its devices, hoping instead to profit from the possibility of advertising to customers.

The analysis group Juniper Research predicts that by the end of 2014, 300 million devices will be able to offer their users swipe-and-pay. The value of contactless payments and ticketing using NFC will hit $113bn per year by 2016, it said in a recent report.