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Google expanded its mobile payment experiment this month, announcing a software update to the Sprint Nexus S 4G that enables the phone's near field communications functionality. Right now, eligible Nexus users can link their mobile handsets with any of four supported Citi MasterCard credit cards

Google Wallet users with credit cards from other banks can use their accounts to fund a fifth NFC payment option: the Google Prepaid Card. Google credits new account users with $10, and has pledged not to charge account fees for Prepaid Card top-ups or purchases through the end of 2011.

How Google Wallet works

Google Wallet users can tap their phone against NFC-enabled point-of-sale devices bearing either of two symbols:

  • MasterCard PayPass. Google Wallet leverages MasterCard's current PayPass platform, already supported by national retailers such as CVS, Duane Reade, Sunoco and Foot Locker.

  • Google SingleTap. Google Wallet also features special offers and loyalty credit for retailers who use its new SingleTap device, including American Eagle Outfitters, OfficeMax, Toys R Us and Jamba Juice.

How NFC works

NFC devices use technology similar to "contactless" credit cards, enabling their compatibility with existing payment terminals. Because NFC phones connect to accounts stored remotely, users can change payment details on the fly or even wipe account information remotely if a phone is lost or stolen. To further prevent credit card fraud, first time users must complete an account verification process before spending more than $100 with the service.

In statements on its company blog and FAQ pages, Google has assured merchants that it does not intend to charge additional fees for accepting Google Wallet. Instead, the company intends to use its mobile payments platform to encourage merchant participation in its AdSense and Offers advertising programs. The search and advertising giant also has hinted at plans to expand Google Wallet to additional issuing banks and phone manufacturers over time.