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Turn your phone into your digital wallet

According to one research firm, mobile smartphone payments will grow by a factor of four and account for $1.3 trillion of all retail transactions by the year 2017.

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That’s a lot of electronic money flying around!

And that’s exactly why Google and Apple are scrambling to claim their slices of the mobile payment pie.

The search giant took the early lead in the race when it launched Google Wallet a year ago. Apple just got going with Passbook, which debuted in iOS 6.

Here’s a rundown of how these two mobile wallets work – and where they seem to be headed.

With Google Wallet, you enter your credit and debit card information into the app. The information is encrypted and stored on a special chip called the Secure Element.

When it’s time to make a payment, you open the Wallet app and select which stored card to use. Enter your PIN to approve the transaction, and then tap the back of your smartphone to a payment terminal.

The terminal and your phone wirelessly connect and process the transaction using Near Field Communication. This is accomplished with an NFC chip in select Android smartphones. If there’s a Google Offer connected with the merchant, it will also be redeemed automatically.

So far, consumers and merchants have been adopting Google Wallet slowly but steadily.

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