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Google Patent Shows Its Mobile-Payment Ambitions, but Raises Privacy Flags [Update]

For some time, Google (GOOG) has been interested in the mobile payment business. Rumors had it that the company would soon test a service by midyear in both New York and San Francisco.

Now the rumors have some more tangible back-up in the form of a patent application that not only describes a versatile payment system, but one in which Google would obtain details of purchasing that are normally unavailable.

Patent application number 20110071921 is called DISTRIBUTED ELECTRONIC COMMERCE SYSTEM WITH CENTRALIZED POINT OF PURCHASE. Filed on November 24, 2010 and made public today, it describes a system in which the following happens:

  1. A third-party broker or software receives a description of a virtual shopping cart from a remote customer device.
  2. The cart identifies items for purchase by the customer from a remote merchant.
  3. The broker calculates the total due (including shipping and other possible options).
  4. The broker charges the customer.
As the application describes, the customer device explicitly can be a mobile device or mobile phone. Although the patent description mentions e-commerce, there is nothing obvious in the patent that would restrict its use to a purely online transaction. Look at the following diagram from the application:

There are no specification requirements on the network. It could as easily represent a near field communications (NFC) connection, the mobile bump-and-pay approach, as one carried out on the Web. Here's an explanation by a PayPal (EBAY) executive about why mobile is so interesting for payment processors:

Google has also pulled a slick trick in its approach to both fixed-location and mobile payment. Payment systems generally function between the merchant and the broker, such as with credit cards or PayPal (EBAY). The broker only gets from the merchant the authorization request for the total payment. Customers are not directly involved.

Under the system described in this filing, all information goes through the customer's device to the broker, which now can keep a running tab of everything the person charges. Shades of privacy concerns, to say nothing of jealousy on the part of established payment system companies that would love to collect such valuable information.

[Update: Google will partner with MasterCard (MA) and Citi Group (C) to add checkout counter payment technology to Android, according to the Wall Street Journal.]


Image: morgueFile user jppi.
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