Welcome to the next great battlefield. Mobile payments is going to be huge, and the big companies are now jockeying for pole position in this potentially gigantic revenue stream.

Foremost among the big companies? Google and Apple. Oh, and electronic payments companies as well, such as Visa and PayPal. But yeah, for the mobile realm, it’s really going to be a war between Google and Apple.

Well, Google has just fired the first real shot by announcing its Google Wallet initiative. Google Wallet will allow people to pay for their bills — restaurants, shops, et al — with a wave of their smartphones.

What’s the big deal, you may ask. Well, the deal is that a widely accepted smartphone-payments system will mean huge revenues for Google in the form of tiny commissions per sale. The tiny fees, even if just in fractions of cents, will add up quickly.

So now you know why the latest Android devices will be coming with NFC chips (the thing that allows for electronic transactions). It’s all coming together.

And it’s not just spot payments that Google Wallet will make possible. It will also give users access to instant discounts, offers and automatic loyalty points programs. Along with this, Google has also launched Google Offers, where users get deals and discount promos emailed to them, which they can then avail of and pay for via their phones.

Google has lined up some big guns in this battle: big US chains like Macy’s, Walgreens, Bloomingdale’s and Toys ‘R’ Us are going to be part of the venture. In fact, Google says that some 300,000 merchants across the US are already going to be part of the payments network.

The number of allies is important because wideness of use will determine the winner in this war. Kind of like how Blu-Ray won over HD-DVD.

Apple has some catching up to do

Apple isn’t taking this sitting down of course. Rumors are rife that the iPhone 5 (due 2012?) will also have NFC chips. And Apple has the advantage of already having a payments system in place in the form of iTunes.

Then again, are you ready to pay for your groceries using iTunes?

Google also has the short-term advantage of being first at the gate. It already has an NFC-equipped phone that its developers can actually use and test apps on, in the form of the Samsung Nexus S. This will give Google a big headstart in this war.

So yeah, Apple is going to have quite a lot of catching up to do if it wants to rule in this new revenue stream.

Apple has one other disadvantage: it won’t exactly want its payments solution (whatever it is) to work on non-Apple devices. So that limits its market potential. On the other hand, you can bet that Google will eventually come out with a payments app that will be made available on iPhones and iPads once these get NFC chips. That is, assuming that Apple does not block the app.

The other losers: Square et al

Heard of Square? It’s an alternative smartphone payments solution that is being offered by Square, Inc. You plug a small square credit card reader onto your mobile device’s headphone jack (you heard that right — the headphone jack) and it will allow your device to accept credit card payments. This way, anybody can have the ability to become a merchant, which is what Square is counting on.

Thing is, Google Wallet is going to go head-on with Square. While Square still deals with traditional credit cards, Google Wallet is aiming to make cards extinct since all payments will be made by phone.

Then again, here’s what I think will happen: Square may end up getting the small business markets while Google Wallet will grab the large chain merchants. Still not good news though, since over the long term card-free payments will win out over card usage.

Visa was also planning its own mobile payments solution, although they’re still stuck in web mode. And then there’s Amex, with its Serve.com service which is also trying to penetrate the mobile payments sphere. Suddenly, their efforts seem so yesterday.

Then again, Google wants an inclusive system. In other words, aside from having MasterCard and Citi as its partners, Google will eventually want to invite Visa, Amex (maybe even PayPal) to be part of its system.

But first Google has to win the war. Because while it hasn’t won yet, these other payments services will be fighting, kicking and screaming, to get their own systems in place. Once Google wins, expect it to offer a conciliatory hand to embrace these other payment companies into the fold. Yeah, just like Blu-Ray vs. HD-DVD.

Grab your popcorn! (And pay for it by phone once you can…)

It’s going to be one terrific battle, folks. And for now, Google has the advantage. But by next year, it can still be anybody’s game. Whoever convinces the most number of merchants to use their system is going to win this war…

UPDATE: Well, well, well. It looks like PayPal has just slapped Google with a lawsuit. For allegedly pilfering trade secrets. Because the guys working on Google Wallets were themselves pilfered by Google from PayPal. Let’s see how this goes…

Art

Art is a long-time editor for a number of technology publications. He is a Palanca-winning writer whose day job is to try to be as serious as possible while being a management consultant and lecturer. His favorite noodles: chapchae.

email: art@technoodling.netwebsite: http://www.technoodling.net