Google's CEO, Eric Schmidt, has confirmed this recently while giving a presentation at the Web 2.0 technology conference held in San Francisco. The device is powered by a new version of its Android mobile operating system, called "Gingerbread," which will include a payment processing tool.
"You will be able to take these mobile devices that will be able to do commerce," Schmidt said. "Essentially, bump for everything and eventually replace credit cards. In the industry it is referred to as tap-and-pay."
The handset features a near-field communication, or NFC, chip that allows phones to transmit data over very short distances. The transactions, which are conducted by tapping a phone against a physical sensor such as a payment terminal, are more secure than magnetic strips that are found on credit cards.
Schmidt said that the new device will be launched within the next few weeks, and that the company intended to partner with payment processors rather than try to expand into that sector.
The handset's name and manufacturer were concealed during the presentation, but many speculate that the new phone, dubbed the Nexus S, will be manufactured by Samsung.
The original Nexus One phone was unveiled at the beginning of the year with the intention of transferring power from carriers to users. But Google stopped selling the device due to low sales, especially with the array of Android-powered devices already on the market.
Android recently leapfrogged over the iPhone to become the world's number two smartphone operating system, and will power several tablet computers coming to market early next year.
With a new smartphone model with built-in mobile payment capabilities, Google not only takes another stab at making a game-changing device but extending its reach into other tech sectors.