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Although it was first announced in early 2015 as more of a payments-as-a-service play to merchants and app developers, Google’s unveiling of Android Pay at its annual I/O event reveals it as a strongly consumer-focused brand development that mimics Apple Pay in most ways. Although this will help to expand the availability of NFC-based mobile payment platforms within the US market, there is little indication of how Android Pay will drive usage, particularly for in-store proximity payments.

Anything you can do I can do better

Google’s ambitions in the payments space have been at best lackluster to date, with its long-running Google Wallet platform now being transformed (again) into a more purely digital wallet focused on the Play app store and P2P transactions. Google Wallet has long suffered from widespread apathy from both the consumer and commercial side of the equation. In particular, this included a lack of partners in the banking or merchant space, and the fact it was initially blocked from much of the market by the ISIS – later Softcard – consortium.

Android Pay, by contrast, represents a next stage in this evolution, characterized most critically by its expanding partnership network. A particular benefit will be the fact that Android Pay will come preinstalled on compatible devices following its acquisition of Softcard and its deals with the major US telcos, Verizon, T-Mobile, and AT&T. Google has also announced partnerships with many of the same big merchant brands that are on board with Apple Pay. Google reports that issuing banks are also partnering on Android Pay to enable card enrollment, but only US Bank has publicly claimed support to date.

Google’s revenue model remains unclear and its partnership with Visa’s Digital Enablement Platform (VDEP) suggests it may have a different economic model from Apple, and substantially better scope for near-term international expansion. Regardless, Android Pay appears to be a wide step away from Google Wallet’s initial model of focusing on collecting transaction information for use in advertising, a model which concerned many merchants who were reluctant to share this sensitive information.

Feature-wise, Android Pay is nearly identical to Apple Pay, with transactions made via NFC on proximity payment which is authenticated via PIN or biometrics on capable devices, and the ability to integrate payments into mobile commerce sites and applications. For most merchants which already accept Apple Pay, Android Pay is a natural extension that will broaden the market. One key distinguishing feature of Android Pay is the integration of loyalty into a single tap at the POS, something that is expected from Apple in the near future.

Google claims its key differentiator is the fact that Android Pay is open to developers via its API, opening up a broader ecosystem for payments. However, Apple Pay also has an API open to developers and can be integrated into online and mobile payment gateways via processors such as Braintree and Authorise.Net. It remains to be seen how developers will take to this, and what may emerge.

By following Apple Pay so closely, it is probable that Android Pay will suffer the same challenges of limited initial take-up by consumers, and the continued dearth of NFC-enabled locations in the US. It also remains to be seen how Android Pay will interact with the upcoming Samsung Pay. Overall, Google’s moves will help to expand the base for mobile payments in the US, but there is nothing in the announced details of Android Pay to suggest any surge in take-up in the near future.


Further reading

“Payments innovation needs to go global for true disruption”,IT0059-000009 (April 2015)

“Android Pay is the next step in Google’s mutating payments strategy”, TE0003-000834 (March 2015)

“Google Wallet pips Apple into Europe, but need to up its game”, IT0059-000002 (February 2015)

2015 Trends to Watch: Payments, IT0003-000628 (November 2014)


Gilles Ubaghs, Senior Analyst, Financial Services Technology

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