Google Wallet with MasterCard {video}

Google and MasterCard have announced the official launch of Google Wallet, their joint effort in mobile payments using near-field communications (NFC).

Google Wallet is rolling out in a limited fashion, but there aren't enough NFC-capable phones out there to really call this a "launch." And that's just the hardware part; customer behavior will have to adjust, too. Industry insiders say the era of NFC payments is still a year or two away.

Google Wallet, a new near-field communications (NFC) based payment system created by Google in partnership with MasterCard and a number of additional partners, is now available on Sprint’s Nexus S 4G. Google Nexus S users on AT&T and T-Mobile are left out in the cold for now. MasterCard confirmed that an over-the-air update is being pushed to the Nexus S 4G on Monday that will automatically install the Google Wallet app. Once it is installed, users can enter in their MasterCard information and use their Nexus S 4G to make tap-and-go payments at 300,000 PayPass locations around the world. Initial users will receive a $10 bonus on their Google Prepaid MasterCard accounts for being an early adopter, too. Google also announced on Monday that Visa, Discover and American Express have provided their NFC specifications so that those payment options can be added to Google Wallet in the future. Read on for a quick video of Google Wallet in action.

Google Loves Its Betas
GigaOM has spotted a Google Wallet-branded NFC reader in the wild, but despite having readers at San Francisco coffee houses and releasing funny George Costanza videos, Google Wallet is not ready for primetime.
Google Wallet will surely be convenient, but the current generation of Android phones is not equipped to handle it. The Nexus S 4G is the only officially compatible phone on the market. Google's announcements so far have been about partnerships, preparing the industry for Wallet, but the consumer side is just not there.
Google has offered some incentives to use Wallet with the initial partners, but it uses a "virtual" system to include people without capable phones. In short, it doesn't count as NFC. For the real deal, there's only one phone (Nexus S 4G), one operator (Sprint), one bank (Citi) and one payment network (MasterCard). This is a trial phase. The NFC World Congress starts today, and Google isn't even making an official appearance. It's Google, remember? Everything's always in beta. Today's Wallet announcements are just an expansion of the test.
The Competition
Google has to come out of the gate strong on mobile payments because it faces stiff competition. PayPal, the pioneer of online payments, seems downright calm about Google Wallet. "Put simply, before you try mobile (or any other payments) solution, you need to be great at payments," PayPal spokesperson Anuj Nayar told us in May.
Visa's digital wallet is coming, and it has also made a large investment in Square, which provides a mobile payment solution that doesn't require an NFC-capable smartphone. Square's Register and Card Case also offer an alternative to NFC for merchants.
Square has also been playing nice with Apple, Google's real competition for the actual point of sale: the smartphone. There have been conflicting reports, but the latest rumblings indicate that the imminent iPhone 5 will have an NFC chip. In the keynote address at WWDC this June, Apple revealed that it has over 200 million iTunes accounts with credit cards, making it "very likely" that Apple has "the most accounts with cards anywhere on the Internet." An NFC-enabled iPhone would make it possible for any equipped merchant to charge those accounts.
The mobile payments field is green, the lines are drawn, and the lights are on, but the teams are still warming up.
Google's Commerce Convergence
Google is working on a bunch of commerce plays right now, and they haven't been integrated yet. In addition to Wallet, Google is still developing Offers, its local daily deals product. While Google announced Wallet and Offers on the same day, they're both far from finished. Offers is only available in a handful of cities.