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NFC Update: Verizon is Walking a Dangerous Line

When it comes to using a smartphone to pay for goods at a cash register, a recent KPMG Consumer and Convergence Report shows that almost 25% of people worldwide are on board with the emerging trend.

And according to Forrester Research, the majority of Great Britain will make a complete switch to all-mobile payments by 2016.

But the United States is a bit behind the rest of the world in adopting mobile payments.

Mostly because there’s only one phone for sale in the United States that comes with the necessary Near-Field Communication (NFC) technology baked in – the Samsung (SEO: 005930) Nexus S 4G, which runs on Sprint’s (NYSE: S) network.

Back in October, Google announced that its next NFC champion, the Samsung Galaxy Nexus, would be launching on Verizon’s (NYSE: VZ) network of over 107 million subscribers. Naturally, I expected this to give mobile payments a much-needed boost in the United States.

To my surprise, no one even mentioned Google Wallet during the Galaxy Nexus’ debut. This NFC application allows users to make payments just by tapping the device against a compatible payment terminal.

But now we know why it wasn’t mentioned: Verizon is giving the NFC application the axe.

According to BusinessWeek, Verizon claims that it’s “working to have ‘the best security and user experience,’ [and] will allow the Google service… ‘when those goals are achieved.’”

I’m not buying that, though. Considering the NFC chip used in the application is already as secure as most ATMs.

Here’s the real reason I think Verizon’s keeping the lid on Google Wallet…

Verizon Deletes Google Wallet With An Evil Grin

Google has several mobile payment competitors, including applications from Square and PayPal. Google Wallet’s biggest threat, however, is ISIS.

If you aren’t familiar with the term, ISIS is a joint mobile payment venture spearheaded by AT&T (NYSE: T), T-Mobile and – you guessed it – Verizon.

ISIS has already rallied support from major Android handset makers, like HTC (Taiwan: 2498.TW), LG (NYSE: LPL), Motorola (NYSE: MMI), Samsung and Sony (NYSE: SNE). It has all of the big credit card companies on board, as well.

So from a business perspective, it’s easy to see why Verizon would wipe the Galaxy Nexus clean of Google Wallet ahead of ISIS’ 2012 release.

But the decision could also draw some unwanted attention for Verizon…

The FCC is on the Lookout for Anti-Competitive Behavior

Starting with the launch of its Nexus One two years ago, the Nexus lineup of smartphones is supposed to deliver the Android experience the way Google wanted users to see it. How Verizon could interfere with the software of a Google flagship device on this level just doesn’t add up.

Also – and more importantly for Verizon – I doubt the Federal Communications Commission (FCC) is going to be happy about this move.

Why? The same reason it just put the kibosh on AT&T’s proposed acquisition of T-Mobile: When businesses fight for user adoption, consumers win. So the FCC doesn’t look favorably on companies trying to squelch the competition.

I contacted Verizon twice – once as an inquiring consumer – to clarify why it’s making this decision that basically dares the FCC to intervene. But I haven’t received a response.

Will NFC eventually take off without Google Wallet running on Verizon? Sure. After all, ISIS promises to be a strong service. But since we need to wait until later next year to use it, playing catch-up with the rest of the world is going to be even tougher.

Bottom line: Technology shouldn’t be denied to users just because Verizon feels threatened. And I’m hoping Verizon realizes this soon, or a not-so-friendly call from the FCC – not to mention consumer backlash – won’t be far behind.

Good investing,

Justin Fritz

Justin Fritz

, Executive Editor

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