Google jumping into mobile payments space?

Google is reportedly teaming up with Citigroup and Mastercard to create a mobile payment system that will turn Android phones into a electronic wallets.

So claims a report in the Wall Street Journal, which cited people familiar with the matter.

The new technology, which is in its early stages, will allow consumers to wave their Android phones in front of a small reader at the checkout counter to make payments, according to the report.

The planned payment system would allow Google to offer retailers more data about their customers and help them target advertisements and discount offers to mobile device users near their stores, the sources told the WSJ.

Google is not expected to get a cut of the transaction fees, the paper said.

Initially, holders of Citigroup-issued debit and credit cards would be allowed to pay for purchases by activating a mobile payment application developed for one current model and many coming models of Android phones, the paper said.

Google, Citigroup and Mastercard could not immediately be reached for comment by Reuters outside regular US business hours.

Earlier this year, LG confirmed it was entering the mobile payment space - a market reported to be worth $1.13 trillion, according to IE Market Research - with a roll-out tipped for 2012.

"The point-of-sale technology, which will be targeted at small and medium-sized businesses and will involve NFC or near field communications and cloud computing, is currently in beta testing," said Jin-Yong Kim, vice president of LG's Home Entertainment division's business arm, in an interview with Reuters.

Near-field communications (NFC) and mobile payments were the talk of this year's Mobile World Congress (MWC) event in Barcelona.

"NFC is starting to get a lot of traction," Charlotte Blanchard, director of products and services at 3, told IT PRO at the event in February.

"Operators are all behind it [and] we are starting to see manufacturers behind it as well. It feels like all the pieces are coming together."

(Additional reporting by IT PRO)