Google Expected to Introduce a Wireless Payment System

Google is expected to introduce on Thursday a mobile payment system that will let shoppers wave their phones to pay instead of pulling out a credit card, according to people briefed on the announcement.

Google will offer mobile payments with MasterCard and Citibank, according to one of the people, as well as with cellphone carriers, hardware manufacturers and retailers.

Initially, the mobile wallets will be available only on Google’s Nexus S phone and will use a Citibank-issued MasterCard credit card number and a virtual Google MasterCard prepaid card. Consumers will be able to make payments at any of the 124,000 merchants that have MasterCard’s PayPass terminals, which accept contactless payments, a person briefed on the deal said.

The people familiar with the deal were not authorized to speak until the deal was publicly announced. The news of the announcement was first reported by Bloomberg News.

The three companies have also teamed up with a few retailers — Macy’s, American Eagle Outfitters and Subway, a person familiar with the deal said. After these retailers upgrade their terminals — at first, only retailers in New York and San Francisco will participate — consumers will also be able to redeem discounts and participate in loyalty programs.

While several companies have been working on mobile wallets for years, they have not yet been widely adopted because all of those involved need to agree on how the wallets will take shape and how the various stakeholders will get paid. Mobile phone carriers, banks, credit card issuers payment networks and technology companies have been battling over their roles.

“Google is dipping their toe into the water and it will accelerate other efforts from other providers,” said Rick Oglesby, a senior analyst at the Aite Group, a research and advisory firm focused on the financial services industry.

Google plans to use a technology called near-field communication, or N.F.C., which is incorporated into a chip in mobile phones to make payments, redeem coupons, earn loyalty points and receive special offers. When a phone is waved in front of a credit card reader, it wirelessly sends an encrypted signal with a person’s credit card information. After that, the transaction is processed like a normal credit card transaction at a store.

Google’s announcement has been expected since it introduced the latest version of its Android mobile phone software, which has the capacity for N.F.C., and its Nexus S phone, which includes an N.F.C. chip.

Representatives for Google, MasterCard, Citigroup and Sprint, a carrier for Google’s Nexus phones, declined to comment.