Google’s New Android Phone Aims to Replace Credit Cards

Google’s CEO Eric Schmidt has announced that a new Android mobile smartphone will power mobile payments.

Eric Schmidt, Google’s chief executive, showed off the company’s next Android-powered phone, which will contain a chip that will allow people to make payments via their handsets. Photo: Pittaya Sroilong/Flickr

Google plans to introduce near-field communications chips in the next version of Android, which is due to arrive in a few weeks, according to chief executive Eric Schmidt.

Eric Schmidt, kicking off the Web 2.0 Summit at the Palace Hotel in downtown San Francisco, held up an ‘unannounced product’ that appeared to be the company’s next Android-powered phone, Google Nexus S, which leaked out on Best Buy’s website last week.

The phone — which had its brand label covered — was running Android 2.3, code-named Gingerbread. It was also fitted with a near-field communications chip that Schmidt thinks could eventually replace credit cards.

Near-field communications chips allow for fast short-range wireless transmissions, and credit-card companies believe that those transmissions are actually more secure than the mag-stripe technology used in credit cards now, Schmidt said.

Credit cards are not likely to go away just yet, but Google is interested in putting the technology in front of developers to see what happens, he said.

The latest version of Android, called Gingerbread, due to come out in the “next few weeks”, will power this new handset according to Schmidt, and will feature this new mobile payments system as a key tool.

“This could replace your credit card,” Schmidt said. “The reason this NFC chip is so interesting is because the credit card industry thinks the loss rate is going to be much better, they’re just more secure.

Search on mobile phones will also be part of Google’s venture into commerce, he added. “Imagine I’m walking down the street and instead of typing my search, my phone is giving me information all the time; it knows your store preferences,” he said. “It is likely to drive a very, very large mobile e-commerce business.”

Users will need both a phone with an NFC chip and Android’s Gingerbread operating system in order to activate the technology.

The near field communication technology allows people to tap their phones on a symbol or an item in the real world to make an action happen, such as a payment. Schmidt said it will it will allow people to “tap and pay”.

Schmidt stressed that Google had no alliances with any retailers and those relationships would be put in place by the credit card companies and retailers independent of the search giant. Instead Google will partner with third party payment processors.

He also said that Google would not retain any personal data obtained through credit card transactions via the phone.

However, despite saying that he could envision this type of mobile technology replacing the credit card, Schmidt would not put a time frame on this migration. Instead he said: “Who knows?. I anticipate my credit cards will be around for some time.”

Schmidt was keen to emphasise that NFC technology provides a brand new platform for people to start thinking about new apps, which can use the same “bump for everything” technology, as it was described on stage.

With its commerce offerings, Google Inc. is entering a competitive space, which includes eBay and, comparison shopping sites, payments start-ups like Square and apps that send information to phones when shoppers enter stores, like Shopkick.

Asked what Google’s next billion-dollar businesses will be during a discussion of Chrome and Android, Eric Schmidt brought up commerce again.

“There are probably very interesting digital goods and commerce types of businesses that could be built on top of the platforms we’re discussing,” he said. [via The Telegraph (UK) and CNET]

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