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Google
is joining Citigroup and Mastercard to set up a mobile payment system
that will turn Android phones into a kind of electronic wallet, the Wall
Street Journal said, citing 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, the
Journal reported.

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 U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Dhara Ranasinghe)