credit card

Credit card issuers and consumers could shape the next generation of retail payment technology in the cafes and clothing shops of San Francisco, according to industry observers.

A Wall Street Journal report suggests that Google will launch trials of a new payment system that allows customers to wave their smart phones at sophisticated cash registers in lieu of swiping their credit cards. This "near field communication" technology already exists in some phones powered by Google's Android operating system. Sources indicated that the online giant would test the system this summer with transactions for Macy's, Subway, and American Eagle Outfitters in the Bay Area.

Square introduces virtual tabs

Meanwhile, another San Francisco startup launched trials of its own alternative to physical credit cards. Square, a company launched by Twitter co-founder Jack Dorsey, released a new version of its credit card processing system this month. In addition to letting merchants swipe credit cards through its iconic magnetic stripe readers, Square now allows customers to set up virtual "tabs" at their favorite stores and cafes.

Upon recognizing a regular customer with at least one previous Square transaction, merchants can add small purchases to tabs by matching a customer's name and face to their stored profile. Purchased amounts settle to credit cards on file with Square's secure servers. The company has signed up a few dozen merchants around San Francisco to test the service before a planned, nationwide rollout.

Looking beyond the plastic

Both technologies hint at a future where credit card accounts and features matter more than the presence of a physical card. Banks and payment networks like the ideas behind alternative payment systems, especially those that won't rely as much on expensive manufacturing and fulfillment services.

For instance, a traveler who loses an NFC-equipped wireless phone can invalidate that unit's payment information remotely when picking up a replacement device from a neighborhood electronics store. Likewise, lenders can issue virtual credit card numbers instantly for use with transaction platforms, like Square or PayPal. Banking industry insiders expect to watch both field trials closely throughout the summer.