Google Wallet

Making payments via NFC requires one additional piece of hardware, called the secure element (SE).  A secure element is a tiny microcontroller essential  for industry-standard payment protocols that typically comes embedded with the NFC antenna. No payments can be processed without it on any of the major networks (MasterCard, Visa, American Express, Discover). Its function is to store the encrypted payment card information that gets transmitted to a merchant’s NFC device – essentially, think of it as the virtual replacement to the magnetic strip on a credit card. Secure elements, as their name implies, are secure – multiple levels of protection and encryption exist within the microcontroller to prevent extraction and duplication of the payment card data inside. Additionally, SEs are separate from a phone’s operating system and hardware – only authorized programs like Google Wallet or ISIS are allowed to access the secure element, and only enough to initiate the transaction.

Secure elements are truly the place where the NFC battle is currently being fought. Partially, this is because secure elements are limited in the amount of data they can store – the original embedded SEs found on Nexus S handsets only have a capacity of 72kb of information. With such limited space, it becomes clear that whoever controls the Secure Element controls the available space within. ISIS hopes it can leverage its control over this virtual space to procure revenues [1]. Google Wallet originally started with a similar model, but in 2012 dropped issuer-specific payment credentials in favor of a single, prepaid account issued by Bancorp using the MasterCard network. This single pre-paid account draws funds as needed from customers’ existing credit cards, which are stored remotely on encrypted Google servers. This allows for a multitude of different credit cards to work with Google Wallet without Google having to negotiate individually with the over 8,000 issuers in the U.S.

NFC devices, and therefore secure elements, are typically placed in one of three places: the SIM card, embedded in the phone and on a removable SD card. The most widely used option today is the embedded solution, where NFC antennas and secure elements are baked onto the actual hardware of the smartphone. This also represents a middle ground solution between Google Wallet, who generally wants SEs to be open, and ISIS, who wants to keep the secure elements proprietary.

SECURE ELEMENTS & COMPETITION

In December of 2012, Verizon blocked the Google Wallet app from working on their customers phones. Users received an error message that stated “Unfortunately, Google Wallet is not available on your device or mobile network”. Google has since filed a complaint with the FCC and a formal decision has not yet been made.  Even without openly blocking Google Wallet, mobile carriers can still dissuade users from using the service, for instance, by not offering it on their Android app stores. Today, Google Wallet works officially on all NFC enabled Sprint phones, some US Cellular phones and two Virgin Mobile phones:

  • Samsung Nexus S 4G on Sprint
  • Samsung Galaxy Nexus on Sprint
  • Samsung Galaxy Nexus GSM/HSPA+
  • Samsung Galaxy Victory 4G LTE on Sprint and Virgin Mobile
  • Samsung Galaxy SIII on Sprint, MetroPCS, and US Cellular
  • Samsung Galaxy Axiom on US Cellular
  • LG Viper™ 4G LTE on Sprint
  • LG Optimus Elite™ on Sprint and Virgin Mobile
  • LG Nexus 4 GSM/HSPA+ (available for purchase on Google Play)
  • HTC EVO 4G LTE on Sprint

End users can sometimes, but not always, circumvent carrier controls by gaining root access to the phone operating system. Google Wallet unofficially works on AT&T Android phones and some T-Mobile Android phones, but not on any Verizon phone. Tellingly, Sprint has not deigned to block ISIS.

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