Google Inc. is collecting the pieces for a major mobile payments system — but it is a long way from assembling them.
News this week that Google had bought a Canadian startup called Zetawire Inc., which has filed a patent application for a mobile payment system, has intensified chatter about the company's plans. But analysts say Google's recent moves demonstrate more of a see-what-sticks approach than the formation of a well-defined business strategy.
"People are making strategic acquisitions in order to position for mobile payments," said Richard Crone, the chief executive of the payments consulting firm Crone Consulting LLC in San Carlos, Calif. "It reminds me of the heady days … of the Internet … where there were a bunch of strategic acquisitions made in order to position for Internet commerce."
As with Apple Inc., which is expected to enable future versions of its iPhone to be used as payment devices at the point of sale, experts are closely watching Google because of its potential to disrupt the payments industry and displace traditional players like banks and processors.
A Google spokeswoman confirmed the purchase in an e-mail but would not discuss its details or the company's plans for Zetawire's technology.
Recent developments suggest that the Mountain View, Calif., company is moving ahead with technology that could let people use their phones as a payment card substitute. But the fine-print details — or the lack of them — show that it may still be a long way from being able to do that.
Google's announcement last week that the Nexus S, a smartphone made by Samsung Electronics Ltd. that runs on Google's Android operating system, has near-field communication technology embedded in it was heralded by experts as a significant development for the deployment of mobile payments services.
NFC technology, which can allow two-way communication between a chip inside a phone and a reader, is considered a key ingredient in making a mobile payments system work. But the type of NFC technology inside the Nexus S is read-only, meaning it can accept information from a source but not transmit it from the phone.
"For mobile payments to work, it's a question of having two-way, back-and-forward" communication, said Drew Sievers, the chief executive of mFoundry Inc., a Larkspur, Calif., mobile banking vendor that supplies the software Starbucks Corp. uses for its point of sale mobile payments smartphone application.
Sievers said he expects Google eventually to enable two-way communication. Meanwhile, giving people access to NFC, even in a read-only mode, helps educate them on how a smartphone could be used for payments.
"I wouldn't underestimate the importance of what they're doing to train consumers how to think about their phone differently," Sievers said.
The Zetawire deal "reinforces the notion that Google is going to turn in some sort of play on NFC," but "it's not all clear what that would be," said Aaron McPherson, a practice director at IDC Financial Insights in Framingham, Mass.
At this point, "there's no solution here," McPherson said. "They're just assembling components."
McPherson said he sees Google's push into mobile as an attempt to further diversify beyond online search and advertising, which accounts for the lion's share of its $23.7 billion annual revenue.
"Google's dilemma, and the thing that they're continuing to struggle with, is, what do they do besides search that makes money," McPherson said. "They don't make any money from Android. They don't make any money on Google Docs. They're able to spoil other people's parties by providing free offerings for stuff that people used to pay for."
Nick Holland, a senior analyst at the Yankee Group research firm in Boston, said Google does not have a particularly good track record in payments services, which is one reason the search company appears to be focusing more on services peripheral to mobile payments than on the payment itself.
Google Checkout, its e-commerce payments system, has struggled in its competition with PayPal Inc., eBay Inc.'s payments system, Holland said.
"Google hasn't done a particularly impressive job when it comes to anything around their own payment brand," he said. "If Google Checkout is anything to go by, I wouldn't be particularly concerned if I was an issuer or processor" when looking at its mobile payment plans.
Given its strength in online advertising and location-based technology, a more logical area related to mobile payments for Google to focus on would be related to the delivery of coupons and other offers to consumers via their smartphones, Holland said, as well as letting merchants communicate with potential customers before they enter their stores.
"I don't think Google's really pursuing mobile payments, but they will be an enabler of it," Holland said. "I think the bigger picture is them sticking to their knitting, which is location-based research."
Experts have said such services probably present a much bigger revenue opportunity than mobile payments alone.
"There's obviously a huge marketing opportunity in getting to the local advertising market," Crone said. "It starts with locating the store and searching for products. Up to this point there's been a bifurcated sales effort on the part of most companies, where you separate online from the in-store retail experience. That's all blurred with mobile. Mobile's now a cross-channel enabler."
For Google, the missing piece is a check-in component, which NFC could enable, he said.
"The play here for Google is, if they can get consumers to check in, then they can check out, and that's where mobile payments comes in," Crone said.