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Google Inc.’s latest foray into mobile payments made its way to the public Thursday when the technology giant announced the release of Android Pay.
Available only on smart phones and tablets enabled for near-field communication (NFC) and using the KitKat4 or later operating system, Android Pay enables consumers to load credit and debit cards bearing the American Express Co., Discover Financial Services, MasterCard Inc. and Visa Inc.
brands. Financial institutions that support it include AmEx, Bank of America Corp., Discover, Navy Federal Credit Union, PNC, Regions Bank, USAA, and U.S. Bank. Google says Citi and Wells Fargo cards will be supported in a few days, with cards issued by Capital One coming later.
Conspicuous by its absence from this list is banking giant JPMorgan Chase & Co. Asked whether it intends to participate in Android Pay, as it does in Apple Inc.’s Apple Pay service, a spokesperson for the bank tells Digital Transactions News by email: “We will be participating in the future. Don't have additional details on timing to share yet.”
Unlike Apple Pay, which uses NFC and a secure element on the handset to manage transaction security, Android Pay will use NFC and host card emulation. With HCE, banks and other issuers can let consumers load wallets with tokenized downloads from a cloud server rather than store card details on a SIM card embedded in the phone. That means the one-time cryptogram for each transaction made with a tokenized payment card stored in Android Pay is generated as needed in the cloud, Jim McCarthy, Visa executive vice president of innovation and strategic partnerships, tells Digital Transactions News.
Android Pay will be available on Google Play, and will come pre-loaded on new Android smart phones from Verizon, AT&T, and T-Mobile. Android Pay also stores gift and loyalty cards, and special offers. Google says more than 1 million merchant locations accept Android Pay. A forecast from Apple Inc., maker of Apple Pay, says 1.5 million merchant locations will accept its NFC payment service by year’s end.
Google says in-app payment capability will be available later this year, which has much potential, McCarthy says. As consumers use their mobile devices for more commerce, the more business it generates for Visa, he says.
KitKat 4.4, or later versions, are installed on 60.2% of Android devices, according to Google data. Combine that number with the latest comScore data, which shows Android claiming 51.4% of all U.S. wireless subscribers, and approximately 30% of all mobile devices in the U.S. are Android Pay-eligible devices.
Android Pay means the end of the 4-year-old Google Wallet as a point-of-sale payment service. It will be rebooted as a peer-to-peer payments app.
In its place, Android Pay will attempt to succeed where Google Wallet faltered. In addition to a revised business model, Android Pay may get some help because there simply are more places for consumers to use contactless payments. When Google Wallet launched only 124,000 U.S. merchant locations accepted contactless payments.
Additionally, Android Pay joins the established Apple Pay, Samsung Electronics Co. Ltd.’s Samsung Pay, which is expected Sept. 28, and CurrentC, a mobile-payment service still in development by the retailer-backed Merchant Customer Exchange.
“What it does is increase the pool of potential mobile-payments users, which makes contactless acceptance more appealing to merchants,” says Rick Oglesby, head of research at Double Diamond Group LLC, a Centennial, Colo.-based payments advisory firm. That improves the value proposition for consumers, he says.
The addition of loyalty programs to Android Pay and Apple Pay, coupled with a “degraded user experience associated with EMV card payments will further increase the merchant and consumer value of using contactless and NFC solutions,” Oglesby says via email to Digital Transactions News. Consumers must insert an EMV card into a POS terminal and leave it there until the issuer’s authorization arrives, unlike magnetic stripe cards that only need to be swiped and removed in one gesture.
Cooperation, too, may be in Android Pay’s favor, says Cherian Abraham, a mobile-payments and fraud expert at Experian Decision Analytics, a division of Ireland-based Experian Information Solutions Inc.
“The [seeming] sun-setting of the Google Wallet app—by deprecating it to do only P2P and creating Android Pay to become a platform that not only allows Google to add a payments layer to all its services, but enabling, banks, retailers and other apps to offer theirs on top of it—is an important distinction,” Abraham tells Digital Transactions News in an email. “In a way, it’s Google doing what’s right for the ecosystem versus trying to own it all. That lesson is a result of half of a decade of misaligned efforts in launching payments for Android, and reconciling with the fact that a collaborative approach gets it closer to its goals and quicker.”
Android Pay has a critical role in this, Oglesby says. “There’s still a lot of work to do to gain widespread consumer adoption, but at this point the networks, banks, operating-system owners, and retailers are all starting to work together towards the same objectives, which hasn’t been the case before,” he says, “so momentum is building and Android Pay’s inclusion in the process is a critical enabler.”
