--Consumers can add existing credit and debit cards to Google Wallet
--Previously Google planned to strike individual relationships with banks
--Visa, MasterCard, AT&T and PayPal are pushing their own systems
(Updates with PayPal comments in paragraphs 14-15 and new information about Isis in paragraphs 16-17.)
By Andrew R. Johnson
Google Inc. (GOOG) unveiled changes to its mobile-payment system Wednesday in a bid to get the upper hand in the battle for control of consumers' "digital wallets."
The revamp allows a consumer to load any existing credit- or debit-card number into a software application, which then can be used to make purchases using smartphones equipped with a special computer chip. The changes aim to eliminate barriers to enrolling in the service.
The move comes as payment networks Visa Inc. (V) and MasterCard Inc. (MA), wireless carriers, and other technology companies like eBay Inc.'s (EBAY) PayPal are rolling out numerous systems aimed at turning consumers' smartphones into virtual credit cards.
Google Wallet, despite being one of the first mobile-payment services to become commercially available, has seen limited adoption because of competition and technical hurdles, such as requiring partnerships with banks.
"Users can now link any of their credit and debit cards to their [Google] Wallet," Robin Dua, head of product management for the service, said in an interview. "This was not the case when we first launched."
When Google Wallet became available in the fall, consumers could make payments using a Google-branded prepaid account that was preloaded into the app or load the app with certain MasterCard-branded credit cards issued by Citigroup Inc. (C), its first and only bank partner to date.
Google's initial plan was to work with individual banks, which then would help enroll their customers in the service; however, the company realized this method could take too long.
"This was an approach that from a negotiation and integration standpoint could take several months to a year," Mr. Dua said. "Given how many banks there are in the U.S., this approach could literally take a lifetime to work through."
As part of the makeover, consumers themselves can load any card into a cloud-based software program without intervention from their bank. Their card accounts are then linked to a separate MasterCard-branded virtual account housed within the Google Wallet. When a customer makes a transaction, money is transferred using that virtual account, though their underlying credit or debit card ultimately funds the purchase.
"Issuers no longer have to do that heavy integration work," Mr. Dua said, adding that Google will continue to work directly with banks that want to be visually represented within the software application.
The strategy could help Google gain an edge over competing mobile-payments systems, namely PayPal and Isis, a service developed by a joint venture of AT&T Inc. (T), T-Mobile and Verizon Wireless, said Richard Crone, chief executive of payments-consulting firm Crone Consulting LLC.
"It's a broad-side shot at both Isis and PayPal," Mr. Crone said.
PayPal, traditionally a service for online commerce that also lets consumers fund accounts with existing credit and debit cards, this year began rolling out a system initially with Home Depot Inc. (HD) that lets customers make purchases at participating brick-and-mortar retailers by entering an identification number at the point of sale.
PayPal spokesman Anuj Nayar said it is on track to have more than 20 national U.S. retailers on board "as well as tens of thousands of small and medium businesses in the U.S." by the end of the year. It also is planning to roll out the service in international markets.
Google's changes are "another validation of PayPal's approach," Mr. Nayar said. "We've had a cloud-based digital wallet for well over a decade that's already regularly in use by over 110 million people."
Earlier this year, J.P. Morgan Chase & Co. (JPM), Capital One Financial Corp. (COF), Barclays PLC (BCS, BARC.LN) and American Express Co. (AXP) said they would allow their customers to participate in tests of Isis, which is scheduled for trials in Austin, Texas, and Salt Lake City this summer.
A spokeswoman for Isis declined to comment.
Visa, MasterCard and American Express are each promoting their own online- and phone-based payment systems.
Research firm Gartner Inc. (IT) in May said it estimated the value of mobile-payment transactions would reach $617 billion worldwide by 2016, up from $105.9 billion in 2011.
Google's changes also allow a consumer to remotely disable their Google Wallet account online if their phone is lost or stolen.
Google Wallet is compatible with cards from Visa, MasterCard, American Express and Discover Financial Services (DFS). It relies on a technology called near-field communication, or NFC, which allows for the transfer of cardholder information from a consumer's phone to a retailer's payment terminal.
For the system to work, both a consumer's phone and the merchant's terminal must contain the NFC technology.
There are currently six smartphones on which Google Wallet is available. It can be used at any merchant whose terminals are equipped with MasterCard's PayPass contactless-payment technology, of which there are more than 200,000 U.S. locations.
Google's shares closed down less than 0.1% at $632.68 Wednesday.
Write to Andrew R. Johnson at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 01, 2012 18:39 ET (22:39 GMT)
Copyright (c) 2012 Dow Jones & Company, Inc.