Google is working with MasterCard and Citigroup on a mobile payment service designed for NFC-enabled Android phones like the Nexus S, says an industry report. Meanwhile, Google is planning a Nexus-branded reference tablet built by LG, and might block tablets equipped with Android 2.x from upgrading to Android 3.0, says another report.

Under the proposed mobile payment plan, holders of Citigroup-issued MasterCard debit and credit cards who have NFC-equipped Android phones will be able to use an upcoming mobile app to pay for their purchases, according to the Wall Street Journal. Users would receive targeted ads or discount offers via the NFC (near field communication) short-range wireless connection, and then manage their payments using the app, says the story.

The deal is also said to include VeriFone Systems, suggesting it is the same payment scheme that Bloomberg uncovered on Mar. 15. Google was reported to be testing mobile payments at stores in New York and San Francisco using VeriFone payment devices and the Google-branded, Samsung-built Nexus S (pictured), the first Android phone to offer NFC. Mobile payments firm Vivotech was also said to have played a role in the tests.

According to unnamed sources cited by the Wall Street Journal, Google sees the payment system as a way to boost its advertising business by offering retailers more data about their customers and helping them target ads and discount offers to Android users near their stores. Google will not get a cut of the transaction fees, however, says the story.

The WSJ quoted VeriFone CEO Doug Bergeron as saying, "A phone is a lot smarter than a card. It opens the door to a rich experience at the point of sale that retailers really covet." Bergeron declined to comment on the project, but a Wal-Mart Stores representative confirmed the company had a briefing with Google about the technology, reports the WSJ.

The story also cites a report issued this month by the U.S. Federal Reserve, claiming there were 70 million contactless devices, including credit and debit cards, and 150,000 contactless readers installed by merchants in the U.S. Very few of these are installed in phones, however.

The Android 2.3 "Gingerbread" build released in December added NFC support, potentially letting consumers tap their NFC-enabled phones against objects and machines with NFC sensors to enable wireless data exchange, including the payment of goods in stores. 

Google in December launched the Samsung Nexus S, which was both the first smartphone based on Android 2.3 and the first Android phone with native NFC support. Google began testing NFC on the Nexus S in December in Portland, Ore., but reading was limited to posters and signs. One month later, a job posting for an NFC specialist popped up on Google's careers webpage.

LG-built Nexus tablet coming, says report

Google's controversial decision to delay the open source code release of Android 3.0 ("Honeycomb") was said by Android chief Andy Rubin to be necessary in order to keep vendors from trying to load the tablet-oriented OS phone onto smartphones. It also strongly suggested that Google had rushed Android 3.0 to market by way of its debut appearance on the Motorola Xoom tablet, and the extra time was required to smooth out some rough edges in the code.

Now, it appears that Google will make a second stab at a polished Honeycomb release with an upcoming Nexus-branded tablet made by LG, according to Mobile-Review's Eldar Murtazin, as reported by "Staska" on UnwiredView. (The main gist of Murtazin's original report somehow survives this goofy Google translation from the Russian.)

It would make sense that, just as Google attempted to establish a pure, ideal Android 2.1 platform with the HTC-built Nexus One and to define an optimal Android 2.3 experience with the Samsung-built Nexus S, it would try something similar with Android 3.0 and tablets. Yet, the Motorola Xoom has already acted as a defacto reference platform for Honeycomb, as suggested by the Tegra 2 processors and very similar specs of other announced Honeycomb tablets.

This would suggest, as Murtazin writes, that the upcoming LG-made Nexus tablet will offer a subsequent, more refined version of 3.x. Android 3.1, we presume?

Last week, T-Mobile and LG announced a $530 price for LG's Honeycomb-based G-Slate tablet (pictured), and said it would be "coming soon." The 3D-enabled, 8.9-inch G-Slate offers 32GB of internal memory, and a stereoscopic five-megapixel camera with 1080p video capture, as well as a front-facing videocam, said T-Mobile.

Google blocking 2.x to 3.0 tablet upgrades?

Murtazin also reports that if a Google hardware partner releases an Android tablet on Android 2.x, they are not allowed to update Android 2.x tablets to version 3.0. The Android 3.0 license forbids this, according to the story. It is unclear, however, whether this alleged restriction would be lifted with the upcoming Android 3.x upgrade said to be arriving on the Google-branded, LG Nexus tablet.

Considering that several vendors, including HTC with its Evo View 4G, have said that their 2.x tablets will be upgradeable to Android 3.0, skepticism is in order here. Murtazin's reputation was somewhat tarnished somewhat when he reported last July that Android 3.0 would fork Android, a notion quickly denied by Google. On the other hand, one could say that Android 3.0 does indeed represent at least a partial fork, even if it's true that Google hopes to bring some Honeycomb features to phones with Android 2.4.

So we'll keep our minds open on this rather odd rumor. If it turns out to be true, it could be seen as additional proof that Google is applying undue control over the "open source" Android.

This article was originally published on LinuxDevices.com and has been donated to the open source community by QuinStreet Inc. Please visit LinuxToday.com for up-to-date news and articles about Linux and open source.