Google Inc. says Verizon Wireless is keeping it from building its new mobile payments application into a new line of smartphones that use the Android operating system.

Verizon, which is pushing a competing mobile payments platform, will begin selling the Galaxy Nexus this month. But the smartphone, developed by Google and Samsung Electronics Co., won't include the Google Wallet, a payment and rewards application that is key to Google's attempt to tap the local-business advertising market.

Verizon Wireless said it is still negotiating with Google about installing the wallet, which it said must be integrated into "a new, secure and proprietary hardware element in our phones."

"We are continuing our commercial discussions with Google on this issue," Verizon Wireless spokesman Jeffrey Nelson said.

A Google spokesman said late Monday that Verizon asked it not to include Google Wallet on the new Galaxy Nexus.

"Verizon asked us not to include this functionality in the product," the spokesman said, without elaborating on the reason behind Verizon's move.

Google Wallet needs to be deeply integrated into phones, unlike other common smartphone apps, Verizon said.

Google Wallet lets people use phones to make payments, redeem digital coupons and earn loyalty points with merchants. Google is betting big on the app, which is installed on some phones carried by Sprint Nextel Corp. and relies on technology called near-field communication, or NFC.

The payment system can allow Google to offer retailers more data about their customers and help retailers target ads and discount offers to mobile-device users near their stores. Google hopes to sell ads and discount offers to the local merchants.

Verizon, meanwhile, has teamed up with rival carriers AT&T Inc. and T-Mobile USA on a joint venture that also lets people make payments and redeem offers via their smartphones. That competing project, called Isis, is well behind Google's effort and is expected to begin limited trials next year.

The carrier's move could slow Google's momentum as mobile carriers, credit-card companies, Internet firms and others duke it out over control of the emerging mobile-payment space.

The viability of Google Wallet may be called into question if Sprint, the No. 3 wireless carrier in the U.S., is the only carrier that supports the platform.

A ComputerWorld.com blog earlier reported on Google Wallet's absence on the Galaxy Nexus.