Watching the Google Wallet dog-and-pony show today over the new Near Field Ccommunication (NFC)-equipped digital wallet initiative was really fascinating. And also kind of uneasy.

I just kept thinking, “This is it. This is the future… So why do I have the cold sweats?” Maybe because the thought of trusting Google or any large company with my actual wallet is kind of frightening.

But perhaps I’m being hasty. Before any of us can really figure out how we feel about this new initiative, we should get some understanding about how it will work in the real world. So let’s dig in and see what we’re dealing with here.

Google Wallet, Meet the Public. Public, this is the GWallet.

Google Wallet will be available via a mobile app, and the concept behind it couldn’t be simpler. Users need to set up the service by affiliating their GWallets with a Google account, creating a PIN code, then adding credit cards to the account. The info gets transmitted to a security company called First Data, which will vet and approve the cards for use. Once this is done, spending privileges are active for the provisioned cards, and shoppers need only “tap and go” with their phones to make purchas


So those are the basics. Now for a bit more nitty gritty: Only Sprint‘s Nexus S phones will work at first, and only for a test userbase in San Francisco and New York, with others to follow in a broader release this summer. The system is also limited to direct provisioning of Citi MasterCards at this time. That doesn’t mean other cards can’t be used, but those only work as funding sources for the virtual Google debit card that comes with the app.

And of course, there’s no “tap and go” action without the right hardware terminals, so shoppers can only use this system at retailers who offer PayPass checkouts. While that’s not a small number — with 120,000+ retailers, including Macy’s, Bloomingdales, Subway, Walgreens and others, in more than 300,000 locations all signed up — it’s certainly not everybody. Some of the largest big box stores — like Walmart — seem to be missing, not to mention smaller mom and pops.

Security Matters — A Lot

Geek cred alone won’t be the sole factor in the digital wallet’s success. It needs Main St, USA — i.e., your parents, grandparents, teachers and others — to flock to this new way of shopping, otherwise this cool-looking technology could be dead in the water before it really even floats. And for that to happen, one thing needs to be addressed in a big way: security.

Who doesn’t remember the epic RFID (radio frequency identification) fail that was hyped as “electronic pickpocketing”? When news crews discovered that information could be gleaned from the embedded chips on credit cards over the air, mainstreamers all over the country became afraid of what was in their wallets.

Unlike RFID, Google Wallet uses something called the Secure Element. A user’s data is protected and saved apart from the main OS and hardware, so anyone tunneling into your device won’t have access to it. And there’s encrypted protocols for access control.

At the user level, the NFC chip/antenna actually turns off when the phone’s screen is black. So if the handset is on standby and just hanging out in your pocket, there’s presumably no potential for unknown data skimming by techie criminals. The protocol also uses a PIN code for transactions, and there are settings to prohibit transactions without the app being launched and active. You can also specify an alert limit, so if any charges to your account come in beyond, say $100 bucks, it will trigger a text/email to you for approval. Security is even Even in the interface was designed, your full credit card number is never displayed on screen.

If the device gets lost or stolen, however, it should still be treated the same way as if your wallet was missing. Sure, the PIN code protocol will help block most thieves, but even so, you’ll want to alert your banks and credit card issuers. (Of course, that might be tough to do without a phone, but that’s a separate issue.)

Can This Really Take Off?


When it comes to business, investment follows demand. For Google Wallet to succeed, people have to want this, so more providers, services and retailers get on board. Without that circle of commerce, this whole thing isn’t anything more than an esoteric, limited beta test — not a radical new initiative destined to change our way of life.

It’s early now, and there’s still a testing phase to contend with — that’s true. But this is going to have to be embraced by everyday consumers for it to gain any traction. And given how people were shook up over that scary, vulnerable RFID technology, it won’t be easy. The link with Google Offers, and allowing people to access deals, coupons and rewards cards in one package — well, that will definitely help to entice. But to really get people on board, the company will have to emphasize the security measures in place here — more so than the few minutes of attention it got on stage at the event today.

Speaking of the announcement, it’s kind of curious why Google chose to unveil its GWallet at this time. Thanks to reports like the video above, consumers were already concerned about the technological security of their financial data. But in an era rife with headlines about massive Sony exploits and privacy policies, a lot of people are even more hyper aware of such issues.

Maybe it’s because the company hooked up with MasterCard, whose biggest competitor, Visa, announced its own plans for a digital wallet later this year. There has also been a lot of gossip about Apple looking into its own proprietary NFC solution. And so these juggernauts in their respective fields may have decided that they needed to strike without delay, even if though its “coalition of the willing” was a bit… modest.

Which leads to the question… uh… Sprint? And only Sprint? Initially, I just chalked it up to the fact that this is where the Nexus One 4G resides, so I shrugged it off at first. Then I looked into it a bit more. Turns out, the other three big carriers are all hooked up with a different service called Isis. They’ll probably jump ship if Google Wallet becomes a sensation, but probably not before. And that would surely limit its chances for success, no?

Google knows (even stated) that it can’t do this alone. Beyond its lean, mean partnership, it also leaves the door open to cooperate with smartphone competitors like Apple, Microsoft and Research In Motion on this service.

The big question is, would these major phone makers really step through the door and shake hands with the Android maker?

What do you think? Is there any chance they’ll jump on board with Google Wallet? Will you? Or will you wait and see if it takes off first? And if it does succeed, would a lack of support for it influence your choice of mobile? Weigh in.

For more information about Google Wallet, hit up the official page here, check out the promo clip below or watch the official product launch that follows.

And the full announcement.