Google and Apple want to replace cash

The Google (Nasdaq: GOOG) Wallet has been available for almost a year now, but it's had limited success with consumers. The e-wallet was hamstrung by various restrictions, such as requiring customers to use a prepaid or Citibank-branded card, and it's had only one carrier partner in Sprint Nextel (NYSE: S). Another limitation was its use of near-field communication technology, which had some consumers worried about security issues.

All — or at least some — of that is about to change. Google has announced substantial improvements to its Android-based wallet app, allowing users to add credit cards from Visa, MasterCard, American Express and Discover Financial Services to its e-wallet. In addition, users can continue to use their current payment methods, if they so choose.

Google has also addressed the privacy problem. The new service is based in the cloud, which allows users to mask their credit card information by creating a virtual number. The real information is stored on Google's servers, for added security.

The mobile-payments scene is about to get more crowded
The timing of Google's update, trotted out before its Wallet 2.0 upgrade, is probably no accident. A host of new players is about to enter the field, including the much-heralded trial of Isis, another NFC-based mobile wallet. Isis is backed by a cartel of heavy hitters such as AT&T (NYSE: T), Verizon Wireless (NYSE: VZ), and T-Mobile and has set the trial of its new service for August 20 in selected markets in Texas and Utah. Microsoft (Nasdaq: MSFT) is also throwing its hat in the ring, recently announcing that its new Windows Phone 8 will come with NFC-enabled payment abilities, as well as loyalty-card storage capability.

The elephant in the room, however, may be Apple (Nasdaq: AAPL), which might also be on track to enter the space. Since announcing the soon-to-debut Passbook app, Cupertino has obtained a couple of NFC patents and purchased AuthenTec, a digital-security company with fingerprint-reading technology. Mixing all these ingredients together could produce a very sweet, very complete iOS-based mobile wallet.

Fool's take
Google made a smart move here, smoothly addressing some of the key problems that have kept its mobile wallet from being a hit with consumers. Still, the lack of additional carriers is limiting, and unless Isis is a complete failure, it seems unlikely that the big carriers will deign to add Google Wallet to their lineup. Sprint is reportedly working on its own mobile wallet as well, which could put a crimp in its relationship with Google.

Still, being the first to the table has its advantages, and Google just might acquire a sizeable piece of the e-payments pie, as well as a loyal customer base. Well, at least until Apple shows up.

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