Verizon blocks Google Wallet on its new smartphones

Google said late on Monday that U.S. phone carrier Verizon Wireless is blocking it from installing the Google Wallet app on its new Android powered smartphones. The service allows users to make payments, collect and use digital coupons, as well as earn loyalty points with local businesses through their NFC-equipped Android smartphones.

Later this month Verizon is expected to start offering the Galaxy Nexus smartphone, a joint development between Google and South Korean technology giant Samsung Electronics. However, it will be missing the app that's crucial for Google to tap into the local-business advertising market.

"Verizon asked us not to include this functionality in the product," a Google spokesperson said in a statement to The Wall Street Journal. The reasons behind Verizon's decision were not made clear. The search giant has confirmed that the app will not be available via the Android Market for those that would like to download it.

The nation's largest carrier teamed up earlier in the year with AT&T and T-Mobile USA in a joint venture to offer mobile payments and special offers. The new service, called Isis, is expected to start trials early next year and would essentially be in direct competition with Google's offering. Verizon is yet to make any public statement regarding its decision to block Google Wallet on its devices.

The Mountain View based firm is optimistic about its Google Wallet service, especially because of the lucrative local business market and targeted advertising income it could generate from selling advertisements and offers to local merchants. But for the service to take off it will require more than its current agreement with Sprint, which is limited to a handful of compatible handsets sold by the United States' number three wireless carrier. 

On Friday, Google announced its intention to launch a new one-day delivery service placing it in direct competition with Amazon's Prime service. It is currently in negioations with major retailers and is even considering offering same day delivery for some products in a bid to outdo its established competition.