Google unveiled its much anticipated mobile payments system -- Google Wallet -- in New York on Thursday, promising to change for ever the way people use money for transactions. In the past few thousand years, the way we pay has changed just three times—from coins, to paper money, to plastic cards. Now we’re on the brink of the next big shift, Google stated.

To put it simply, Google Wallet is an Android app that makes your phone your wallet. It is the latest game changing innovation from the search giant. Google says the Wallet stores virtual versions of your existing plastic cards on your phone. One only needs to tap the phone to pay and redeem offers using near field communication, or NFC.

For starters, NFC is the short-range wireless technology which is intended mainly for use in mobile phones. Built into a smartphone, its main uses are “sharing, pairing, and transaction,” according to NFC Forum.

Now the question is how soon will we be able to tap the smartphone to complete a transaction. And using which phone, on which network?

Google says the initial testing of the innovative smatphone-based payment system will start in New York and San Francisco. And, the new app will work on Nexus S 4G by Google, which is available on Sprint network. However, Google has promised that many Android smartphones will have the facility before the year runs out. Also, to begin with, Google Wallet can be accessed only through a Citibank MasterCard. According to an AP report this is a limiting factor initially as only around 135,000 MasterCard PayPass terminals are there in the U.S.

More importantly, Google says the Google Wallet will not cost users an extra penny. It is a free app.

Open Commerce Ecosystem

Google says the Google Wallet is designed for an open commerce ecosystem that will eventually comprise of most of the cards that people keep now i their wallets. And because Google Wallet is a mobile app, it will be able to do more than a regular wallet ever could, like storing thousands of payment cards and Google Offers but without the bulk, Google says.

What that means is that a persons' loyalty cards, gift cards, receipts, boarding passes and tickets, can be seamlessly synced to the Google Wallet. And every offer and loyalty point will be redeemed automatically with a single tap via NFC.

Making payments

Tap your phone to pay with the virtual payment cards stored in your Google Wallet. Your phone sends payment, and, at some merchants, offers and loyalty information. According to Google, when Google Wallet launches, it will support Citi MasterCard, the Google Prepaid Card and gift cards at participating merchants.

Security

Google says the smartphone payment system is extremely secure as the app has a personalized PIN. The NFC antenna in your phone is only activated when the screen is powered on, and even if the antenna is on and in proximity of a reader, payment credentials can only be transmitted from the Secure Element to a payment terminal if you first enter your Google Wallet PIN.

Google says both the Android platform and the Secure Element are designed to prevent malicious applications from accessing the credit card embedded on the smartphone. So there shouldn’t be any fear of someone getting too close for comfort and probably stealing sensitive data.

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