The Competition Google Wallet Faces

The future or mobile payments is here – Google has unveiled its new mobile payment system that goes toe-to-toe with Square and other mobile payment providers.

What Is Google Wallet?

Google Wallet is a combination of Software and a compatible Android device to make wireless payments at compatible stores.

The hardware that makes wireless mobile payments happen is called NFC or Near Field Communication. Google Wallet acts as your virtual credit card and wallet by allowing you to pay for purchases with an Android compatible phone. While the only cards supported are Citi’s MasterCard or the Google Prepaid Card, more banks will support the service.

Google has bundled security mechanisms into Google Wallet to ensure transactions are safe. Wallet offers PIN support and encrypts data on a chip in your phone called Secure Element.

The Future Of Mobile Payments

NFC has received a lot of hype in the past months for its rumored inclusion in the next generation iPhone. However, NFC and Google face stiff competition.

Aside from Apple eying NFC for inclusion in iOS devices, a small mobile payment startup called Square has wireless payments in its cross hairs. Twitter founder Jack Dorsey heads Square and takes the hassles out of mobile payments. Merchants can sign up for a small, unobtrusive dongle that accepts any type of credit card and processes the payment on an iOS or Android device. While Square is targeting merchants, if the process is unobtrusive enough, consumers won’t need to shell out for a NFC compatible phone and with Square approaching $1 Billion in payments processed since launch, it won’t be going down without a fight.

However, Square isn’t the only competitor in the mobile payment arena.

The Controversy With PayPal

Following the announcement of Google Wallet, PayPal filed a lawsuit against Google for stealing trade secrets.

PayPal has a vested interest in mobile payments with its PayPal App but alleges Google knowingly stole trade secrets and implemented them in to Google Wallet. PayPal is backing up its claim that a key employee who worked on Google Wallet was poached after the search engine giant failed to reach an agreement with PayPal to be used as the de facto payment processor for Android.

However, Google isn’t taking the lawsuit lying down. In a statement issued to several tech blogs affirming its defensive stance:

“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. We respect trade secrets, and will defend ourselves against these claims.”

The future of mobile payments is here. NFC looks to be the dominant contender and as more banks and device support wireless payment technology, we’ll see it become a de facto standard.