Google may launch a mobile payments service as early as this year, according to a report from Bloomberg BusinessWeek. This would be based upon NFC (near field communication) technology, which lets mobile device exchange data at close ranges. 

Google CEO Eric Schmidt hinted at such a service in November, saying "You’ll be able to walk in a store and do commerce. You’d bump for everything and eventually replace credit cards." Now, BB cites "two people familiar with the plans" as saying the company is "considering building a payment and advertising service that would let users buy milk and bread by tapping or waving their mobile phones against a register at checkout," and that the service may debut this year. 

Actually, it’s not just Google that is looking for inroads in this area. PayPal and Apple would also appear to be interested. In fact, the report suggests that PayPal is even open to partnering with companies like Google.

A service could indeed debut this year from Google, but it seems unlikely that it would gain a great deal of traction so soon. As TechCrunch’s Erick Schonfeld notes, "A lot of things need to happen before it catches on. The chips first need to be embedded in lots of mobile phones (Google, Apple, and Nokia are working on that). But then on the flip side, merchants need to install NFC chip readers at their cash registers, which is an expensive proposition (a few hundred dollars worth of equipment per cash register)."

The original report says, however, that Google is "ramping up efforts to seed merchants nationwide with NFC tags." The company has been handing out NFC kits, including window tags. 

Should credit card companies be worried? 

It was reported back in August that AT&T, Verizon, and T-Mobile were planning a "venture to displace credit and debit cards with smartphones". Meanwhile, companies like Visa and MasterCard were preparing their own potential PayPal competitors.

If Google does release a mobile payments service, it will be interesting to see if it taps into the Google Checkout brand.