DES MOINES, Iowa—It’s too soon to call whether just-introduced Android Pay or Apple Pay has a leg up with mobile payments, says one expert who feels Google’s new payments solution does signal a consolidation in the direction of mobile POS.
Brian Day, director of digital strategy at The Members Group, reminded that less than a year ago there was a great deal of discussion about payments fragmentation—what will consumers face at POS, bar code, NFC, something else?
“I think we are now seeing, following the introduction of Android Pay last week, more products come along that facilitate payment similar to Apple Pay,” said Day. “Consumers tapping their phone at point of sale seems to be the technology that multiple carriers, providers and technology companies are embracing. Momentum is moving in one direction now, which is positive for mobile payments.”
Similar to Apple Pay, Android Pay works on phones running the Android operating system and allows consumers to upload credit, debit and prepaid cards to use in making payments at any Android Pay-enabled terminal. Like Apple Pay, the solution also uses near-field communications to connect the terminal and the phone. Navy FCU will be among the very first institutions to offer the new digital wallet solution.
Greater Reach
Android Pay comes pre-installed on devices with the latest operating system (Android M) and will be capable of both in-app and in-store transactions, Day noted.
“Ironically, the same carriers with which Google once butted heads to offer a mobile wallet tool—AT&T, Verizon and T-Mobile—will now pre-install Android Pay on their devices, likely including the Samsung Galaxy units. In comparison, Apple Pay is only available to iPhone 6 and 6s owners, limiting its reach.”
Looking at merchant acceptance, Android Pay and Apple Pay appear to offer similar numbers, each citing 700,000 merchant locations as places consumers can use the NFC-enabled mobile wallets, Day pointed out.
“The only contender that may be able to offer greater acceptance is Samsung,” Day said. “In addition to NFC, Samsung Pay uses magnetic secure transmission, the same technology used by credit and debit cards today. So it’s expected to work at 90% of the country’s terminals.”
Another advantage for Android Pay, at least for now, said Day, is rewards.
“With Android Pay, Google is re-introducing loyalty to mobile payments on a wide scale and is even allowing select retailers to integrate their own rewards programs with Android Pay. Apple is expected to roll out enhancements to Apple Pay soon, and one of these is rumored to be the inclusion of a loyalty component,” he said.
Brian Day, TMG
No Bottom Line Loss
And while FIs, many being credit unions, have rushed to enroll with Apple Pay, experts have cautioned about the hit to FIs’ bottom lines from the 15 BPs Apple takes from each transaction. That won’t likely happen with Android Pay, said Day.
“In what could be another bonus for credit unions and community banks, Android Pay will not require the same fees as Apple Pay,” Day explained. “As just announced by Visa during its launch of the Visa Digital Enablement Program, no pass-through fees between technology partners and financial institutions will be allowed.”
Perhaps the biggest advantage of Android Pay is its open API (application program interface), explained Day, which allows developers to easily work with the new payments solution.
“An open API, unlike a proprietary API (Apple Pay), paves the way for more developers to build payments functionality into their own apps, including mobile banking apps,” said Day. “Apple has been a more closed and controlled ecosystem.”
TMG has contended for years that the market winners in digital banking will be those that combine banking and payments functionality. Consumers want one clear view of their complete financial picture, he said.
“The credit unions and community banks looking to provide that may find an easier path with the release of Android Pay,” said Day.
Google Wallet Now P2P
A phone’s payment capability has yet to be a factor when consumers go to buy a phone. However, Day posited that if some big differentiating mobile payments feature were devised, that might sway consumers’ phone-buying decisions.
“And with Google, allowing developers access to the ecosystem . . .,” said Day. “Almost like crowdsourcing—with more minds involved you could get better, more differentiating features.”
Day noted that Google Wallet, the information giant’s first venture into digital payments, now appears to be purely a P2P payments tool transmitting funds between the debit accounts of users.
“It will not allow for mobile point-of-sale transactions. P2P functionality is not currently offered in Apple Pay or Samsung Pay, and Google Wallet is available to both iPhone and Android – and Gmail – users,” said Day.