Google has now finally announced their first NFC Payment system which they call it Google Wallet. They announced this new feature at New York City in a Press Conference. So there were lots of rumors and finally Google announced it, so you'll definitely want to know what Google Wallet is and how it works.It's basically an App for your Android Phone, So while using this Google Wallet app you can buy anything and Pay Directly from your Cellphone.You’ll be able to tap, pay and save using your phone with near field communication (NFC). NFC was introduced in Nexus S.
Some major companies has cooperated with google to make this possible such as, Citi, MasterCard, Macy’s, Subway, Walgreens, and Sprint. Google is now giving trials for this System. And it will be launched officially this summer.
Initially, the Sprint Nexus S 4G will be the only compatible phone, but support for more phones is promised "over time," and Google even suggested that phones without built-in NFC could simply use an NFC sticker (the Google Wallet app itself will work on non-NFC phones as well). You'll also have to use either a Citi MasterCard or Google Prepaid Card with the service, although the latter can obviously be funded from any other card.
Here's images showing how it works :
And Why Merchants are so excited about Google Wallet: