By

In the battle to get people to use mobile wallets, Google has released a new version of its mobile wallet that now lets you tie any major credit or debit card to your phone and make paying for purchases easier.

The Google Wallet first appeared on the scene last year as a way to simplify payment. Mobile phone users who had a smartphone with Near Field Communication (NFC) technology could tie their credit cards to the wallet. Instead of pulling out a credit card to pay for something, they could simply tap their phone.

"One reason often given to use a mobile wallet is the convenience factor. Instead of needing to bring your phone and your wallet out with you, you now only need your phone," says David Kaminsky, analyst with Mercator Advisory Group's emerging technologies service.

Kaminsky says mobile wallets give merchants, card networks, financial institutions and wallet providers the capability to have added value. "For example, a merchant can set up a mobile wallet to deduct the value of coupons stored virtually within the wallet, redeem any available loyalty rewards, make the payment, add loyalty points to the rewards account, send the customer a daily deal offer, check the customer in on Foursquare or Facebook, and much more, all with one action. By replacing plastic cards with miniature computers--which is what smartphones really are--the potential capabilities for what can be accomplished during a transaction are endless."

Although mobile wallets have sped up the transaction process, the concept has been slow to catch on. According to Mercator Advisory Group, less than two percent of people have paid with a mobile wallet using contactless or NFC payments.

When it was first released, Google Wallet was limited in what it could do. Not only did a user need a certain brand of smartphone that had built-in NFC capabilities, he also needed a Citibank card and a MasterCard credit card.

That's all changed now that Google has updated its system. The wallet now works with any Visa, MasterCard, American Express or Discover card, both credit and debit. This expansion is possible because Google has changed how the credit card information is stored.

Previously, the credit card account information had to be stored on a chip located in the phone. To have permission to store those credentials onto the chip, Google had to negotiate deals with each individual mobile carrier, bank and credit card issuer.

Now Google has moved that information to the cloud, which in this case is Google's secure servers. Because that information is no longer stored on the phone, you can store all of your cards in the Google Wallet.

Google Wallet is an app that you can use with certain Sprint or Virgin Mobile phones or Google's Nexus 7 tablet. When you add your credit card information to the wallet, depending on the kind of card it is, it will be linked to a virtual MasterCard or directly enabled by the issuing bank for use with Google Wallet.

Linked cards will connect to a virtual MasterCard card issued by Google Wallet's banking partner, The Bancorp Bank. When you make a purchase, Google activates this virtual card to pay for the transaction and then charges the amount to the credit card in the wallet that you wish to use. The merchant never sees the exact credit card number you're using for the purchase.

Certain credit and debit cards like the Google Prepaid Card and most Citibank MasterCard cards are directly enabled for use with the app. They aren't linked to the virtual card, and when you use them, merchants get the card information, just as they would if you'd given them a physical card.

To ensure your credit card information is safe, the Wallet is secured through a PIN that you enter on your phone. If you lose your phone, you can go online to disable the wallet so that no one else can buy things with your credit cards.

With these changes, Google hopes its mobile wallet catches on. "The biggest reason people are not using mobile wallets is that merchants are not yet offering such added value. The convenience factor won’t be sufficient, as plastic cards are already quite convenient. Once consumers feel that there is additional value in mobile wallets, that will be enough to convince them to change their habits," says Kaminsky.

Kaminsky says Google still has a long way to go to reach its goals with this app. "Google is facing a lot of hurdles in its goal to have a ubiquitous mobile wallet that can be used by any consumer with any merchant. While providing consumers with the ability to link any payment card to their wallet is a step in the direction, they still have a ways to go."