Google Chief Executive Eric Schmidt showed off a yet-to-be-released phone on Monday with a special chip that allows consumers to quickly pay for items by tapping the phone against a special terminal.
Schmidt said support for the technology, dubbed Near Field Communications, will be integrated into the next version of its Android software, "Gingerbread", which he said will be introduced in a few weeks.
"One way to think about it is, this could replace your credit card," Schmidt said, speaking at the Web 2.0 conference in San Francisco.
Google had no immediate plans to develop any of its own mobile applications to take advantage of such payment capabilities, but Schmidt expected other companies to do so.
"My guess is that there are going to be 500 new startups in the mobile payment space as these platforms emerge," Schmidt said. He added that Google would partner with traditional credit card industry players, like payment processors, rather than compete with them.
While NFC technology has been available for years, interoperability with Google's Android software should make the technology more widespread. Google's Android was the second most popular smartphone operating system in the third quarter, according to industry research firm Gartner, behind Nokia's Symbian and ahead of Apple Inc's iOS software, which is used on the iPhone.
In a roundtable briefing with reporters, Schmidt said Google's ability to marry its smartphone software with Internet-based services enabled features like turn-by-turn driving directions and real-time foreign language translation, which distinguished it from rivals' offerings.
"We would argue that our platform is better for applications that are network-resident and that need that kind of power," Schmidt said.
Google, which controls roughly two-thirds of the Internet search market, is increasingly competing with Apple and with social networking giant Facebook.
Earlier on Monday, Facebook unveiled a revamped version of its messaging system that could make it increasingly competitive with Web-based email systems like Google's Gmail and Yahoo Inc's mail service.
Asked about Facebook's potential effect on Gmail, Schmidt said that additional competition would be beneficial, and chided the press for focusing too much on the competition between Google and other technology companies.
"You all are focused on the competition, as opposed to the fact that the market's getting larger," Schmidt said. "And there's no question that more entrants into communications technologies, mobile technologies and so forth, bring more people in."