Evan Schuman's StorefrontBacktalk

Instead, smartphone vendors have to include both an NFC chip and an embedded secure element—hardware that controls encryption and storage of card information. Both of those chips are in the Nexus S. But, like Apple, Google has been skittish about implementing the software that talks to the secure element. And no wonder: Get that software wrong, and you’ll have far more than a minor annoyance. Head down a path that the rest of the industry decides not to take, and you’ll have to backtrack and then catch up with your competitors.

This summer, Google makes that jump first. Google has a little easier time than Apple in choosing an NFC protocol stack. Last month, a French company announced an open-source stack called OpenNFC, and Google has been working on its own open-source NFC stack project called SEEK (secure element evaluation kit). Whether Google picks one or stitches together pieces of several projects, at least Apple will be able to see what its competitor is doing.

That’s the hard part. Once Google has proven it can make an expensive smartphone act like a cheap contactless card, and Apple signs off on some compatible version of the NFC protocol stack for the iPhone, that’s when the fun begins. Apple is widely expected to use iTunes to create its own payment system for brick-and-mortar retail. (Of course, Apple was also widely expected to include NFC in the next iPhone.)

Google’s own payment system, Google Checkout, hasn’t exactly been a winner online, but it might form the basis of an in-store payment system. Or Google could focus on building an infrastructure for authenticating a customer’s identity on the fly—say, by having the smartphone communicate with the carrier to match the payment card number with the mobile account. Or it could even use something as exotic as a voiceprint—these devices are designed to talk into, after all.

Meanwhile, PayPal has announced that it, too, wants to move into in-store payments. For that, it needs smartphones that can do contactless—let’s face it, nobody really wants yet another plastic card. And social media players like Foursquare are beginning to experiment with NFC to make check-ins a lot more accurate than the current geolocation approach that uses GPS.

Once that starts happening, it will be time for retailers to let customers put their loyalty-card points on their phones, too. But not until Apple and Google get their (protocol) stacks together.