Thursday, May 26, 2011

Google Wallet: Why NFC ?

I was excited to read that Google is going to build a payment method based on a smartphone:
Today in our New York City office, along with Citi, MasterCard, First Data and Sprint, we gave a demo of Google Wallet, an app that will make your phone your wallet. You’ll be able to tap, pay and save using your phone and near field communication (NFC). We’re field testing Google Wallet now and plan to release it soon

I have long wished that payments could be made using an active device in the buyer's possession rather than having the buyer type secret information--a PIN--into a device the seller owns. It requires that a device the buyer has never seen before be dilligent about deleting the PIN after it is used. It also requires that a device the buyer has never seen before is making the same request to the bank that it is displaying on its screen. Security is much higher when using a device the buyer owns.

The main flaw with this approach is that it requires people to carry around these active devices. Google's bright idea is to make that device be a smartphone. Brilliant.

The one thing I don't understand is why Google is only supporting it using NFC. I had never heard of NFC until today, and for any readers like me, it is basically it's a really dumb, short-range, low-bandwidth wireless protocol. It sounds well-suited for the application, but no current phones support it.

An alternative approach that should work with current phones is to use bar code reading software. The seller's hardware would display a barcode that includes a description of what is being bought, the amount of money, and a transaction ID number. It would simultaneously upload the transaction information to Google. The buyer would scan the bar code, and if the user authorizes the payment, it would send authorization to Google. The seller would then receive notification that the payment has been authorized. For larger transactions, further rounds of verification are possible, but for groceries and gas, that could be the end of the story.

Why limit the feature to NFC devices? While NFC solutions look a little more convenient, barcodes don't look bad. Why not offer both?


Jason Hall said...

I'm not sure, but I think that NFC means that the phone will work with existing PayPass and other tap-to-pay POS hardware, which means little/no work in selling the technology to stores -- they've already been sold by Amex and others for years.

Lex Spoon said...

Ahhh, that would explain it.

It's still a pity on the buyer's side. I hope someone figures out how to jury rig a dongle of some kind on existing phones.