Another week, another huge mobile payments launch.
With the US debut of Samsung Pay only days away (see our post from last week) the mobile payments space is abuzz with a sudden rollout of Google’s long-anticipated Android Pay. The release, which began last week, will be “staggered” over time and will replace Google Wallet, the search giant’s previous, less-than-successful attempt at driving significant mobile payment volume. (Google Wallet has only been available in the United States since its launch four years ago.)
From Cellum’s point of view, this is great news because Google finally seems to be getting it right. Earlier this year, when the announcement of its new payment ecosystem was made at the 2015 I/O Conference, the company pledged to take an “open approach.” And with Google now restructuring its mobile payments portfolio into two separate software products, we already see two ways in which this openness manifests.
- Android Pay is mostly aimed at fostering “tap and pay” proximity transactions at retailers with Near Field Communication (NFC)-enabled point-of-sale terminals, and thus works on the exact same infrastructure as Apple Pay. The service – which will form part of the upcoming M release of Android – will also support couponing and loyalty programs, as well as in-app remote payments. Google also announced that it would make its APIs available to third parties, though as of now, no details have been made public yet.
- Google Wallet will live on as a separate app focused on peer-to-peer (person-to-person) money transfers. While Android Pay, relying on Android’s HCE capability, will only be available on Android-powered devices, the new Google Wallet will be usable on iOS devices running iOS 7.0 or above.
There is another aspect to Google’s stated aim of creating an open ecosystem. Unlike competitor Samsung Pay, which for the time being is focusing on wider POS penetration with its Magnetic Secure Transmission technology, and is therefore mainly concerned with achieving high transaction numbers, Google’s horizons may be broader. Already this year the company has announced a new “Buy” button for products that show up in its search results, as well as Eddystone, its implementation of Bluetooth beacon services (basically Google’s version of Apple’s iBeacon protocol). It’s easy to see how Android Pay fits into the picture.
But this does not mean we can expect clear sailing for Android Pay.
For one thing, the first iteration of the service appears to suffer from at least one major security weakness, as it lacks mandatory per-transaction authentication for proximity payments. As long as the phone is unlocked, a payment can be made. This is very bad news, considering that already Apple Pay has been reported to suffer from a staggering 6% fraud rate. This lapse is likely by design, with Google feeling that there need to be as few barriers to use as possible. (The old Google Wallet does not act as a continuous running service, meaning users must manually turn on NFC and open the app before tapping their phone on a POS, steps that the company likely found to be major blockages.) But convenience in this case may come at a high price.
Then, as we explained back in June, Android Pay also faces some headwind outside of the US due to the slow spread of EMV tokenization, the backbone of its security. But with MasterCard and Visa steadily rolling out their respective implementations in ever more markets, this is more a question of when, not if.
And finally, perhaps the most obvious challenge of all: If Google wants to get its users on board with Android Pay, it will need to up its marketing game. When Google Wallet launched in 2011, its status as a groundbreaking innovation was enough to garner significant publicity, though the company itself never really seemed to go out of its way to promote the service. With Apple Pay being on market for a year now and Samsung Pay coming shortly, however, the landscape has changed dramatically.
We hope that the email we received from Google last week announcing the conversion of Wallet to Android Pay will hopefully not be the last such effort at outreach, but the first step in putting mobile payments center stage in Google’s own mobile strategy.