Google is in talks with Mastercard and Citigroup to enable users to make payments for their purchases through their Android phones.
If this deal, reported by the Wall Street Journal, is finalised, Google will provide retailers with data about their users, which the retailer can then use to target specific ads and special offers to users in their vicinity.
In addition to being extremely beneficial to users and retailers, thereby driving adoption of Android mobile phones, this service will help Google earn more through ad revenue.
Holders of debit and credit cards from Citigroup and Mastercard will be allowed to activate a mobile payment application on their Android 2.3 phones. This will eliminate the need to carry separate debit and credit cards.
Google will be able to manage the credit card accounts as well as track the spending habits of the customer, through a special application.
Verifone Systems, a company that makes card readers, will make the contact-less devices required for this purpose. This system will function on near field communication (NFC) technology, much like the mobile payment system Orange plan to launch in the UK.
The near field communications technology used in these devices is far more sophisticated than the magnetic strip in the traditional debit or credit card and hence it will be safer to use.
Expected to be launched some time this year, this new service is expected to face competition from Apple and Blackberry, who will also soon make use of similar technology in collaboration with other credit card companies and financial institutions.
Google will, however, have to ensure that they do not upset the advocates of user privacy when they provide user data to retailers in their efforts to drive more ad revenue.