Android Pay

We have already talked about Samsung Pay as a new mobile payment solution for Android devices and now we take a closer look into Android Pay.

Android Pay is Googles latest solution and it is indeed not a direct competitor to Samsung Pay and Apple Pay, as it is an Application Programming Interface (API) which allows android app developers to create a payment platform for their own apps. Android Pay will allow contactless transactions at the POS by using Host Card Emulation (HCE). Additionally Android Pay is also supporting In-App payment with Google Checkout. This basically means that companies who run an Android Application and are interested in supporting mobile payments can simply add an Android Pay API layer to integrate In-App or In-Store contactless payments. Sundar Pichai, one of Google´s top executives also mentioned that Android Pay might accommodate support for biometrics as well.

 

But mentioning Google we also have to talk about the Google Wallet. Google Wallet was the first mobile payment approach of Google launched in 2011. It already used NFC as transmission standard but due to low acceptance rates, a small partner network, and the missing contactless infrastructure Google Wallet was not able to achieve main stream adoption.

Four years later, the market seems to be ready for mobile payments and also Google has improved their wallet over the years. Additionally the acquisition of Softcard former ISIS, which is a consortium of the biggest mobile network operators in the United States consisting of AT&T, Verizon, and T-Mobile, gives Google the opportunity to integrate the Softcard solution in their existing portfolio. Additionally the deal can be a strategic move to compete against Samsung Pay as these mentioned mobile network operators could possibly pre-install the Google Wallet on each individual NFC enabled handset (https://support.google.com/wallet/answer/1347934?hl=en). With Google Wallet you also have the ability to pay your friends via your Google Mail account or even split amounts and pay them to friends.

 

If we look at the user experience we can see slightly differences between Google Wallet, Apple Pay, and Samsung Pay. Like Samsung Pay you also have to wake up your Android device to make a contactless transaction at the POS, with Apple Pay in contrast you don´t have to unlock your smartphone. You can also simple add a Debit/Credit Card of participating banks or a Google prepaid card in your Google web account. Google Wallet is also available for iOS users, but we can see one huge restriction; Compared to the Android version you are not able to make contactless payment at the POS.

 

Google´s benefit

Due to the huge data pool of Google, they are able to track your behavior and send specific offers and offer loyalty programs related to your needs. But if you as a consumer feel uncomfortable with this feature you are also able to simply disable the service.

 

So how does Android Pay differ from Apple Pay and Samsung Pay?

Apple Pay and Samsung Pay seem similar in nature. But the API layer, which is more like a platform and not a product like the other two, allows Google to integrate their solution in third party apps. Therefore Google is able to integrate their solution in much more NFC enabled Android devices than Samsung Pay. This gives Android Pay the opportunity to reach a far greater number of users than Apple Pay or Samsung Pay.

Conclusion

Given the facts above, Google has the ability to make a mark in the mobile payment market. But it will be interesting to watch how Google will improve their Wallet and how they expand their partner network globally and not only in the US to offer mobile payments for consumers of different countries. With Android Pay they are able provide banks and merchants with a payment platform to integrate mobile payments in their existing or new banking applications. But will banks worldwide be willing to let Google and Apple take part in their payment ecosystem or not?

Tech Giant´s and Mobile Payment

Samsung Pay, Android Pay

After few years of rumors the mobile payment market seems to get finally in a very decisive phase. Apple has been the first of those three companies, which introduced a mobile payment system called Apple Pay. Since the Apple Keynote in September 2014 it just took a few months until also Samsung and Google announced at the Mobile World Congress this year that they will launch their own payment systems. Even if the Google solution, called Android Pay will be just an Application Programming Interface to support all Android payment applications to add In-App or In-Store payment functionalities. Nevertheless Google has already designed a Graphical User Interface called Google Wallet and improved it steadily since the first launch in 2011. Samsung instead unveiled a similar solution to Apple Pay even if it just supports In-Store mobile payments with NFC and also MST. The mobile payment market seems to be divided into three big pieces. Apple will cover approximately 17% of the IOS market and Samsung and Google will battle for the Android market share with approximately 78%. But what does it mean for other marketers like Financial Institutions, Mobile Network Operators or Retailers?

These players of course still try to place their own independent solutions in the market to not lose a strategic market to one of those three market giants. In general we can see a trend that nobody can deny; tech giants like Apple and Google continuously try to enter completely new markets to inherit a strategic role in a hyperconnected world in which devices can communicate with each other and all kind of smart devices getting more and more important.

One fact to argue against the tech giants is that nearly every consumer nowadays prefers Financial Institutions, Payment Schemes, Mobile Network Operators, and Payment solution provider over Handset manufacturers and Google. But which applications would you use if Passbook, Samsung Pay and Google Wallet are pre-installed on your device, accepted at nearly every store you shop, and if you have several payment cards from different issuers which you can simply add to your payment application?

I would definitely prefer a payment system which is able to add & manage all payment cards I use and which is additionally connected to different retail applications and of course which is simply and secure at the same time. And if also all my issuing banks and payment schemes are participating in a payment system of Apple or Google I would assume that these systems ensure a secure transaction for any kind of mobile payments.

Of course most of the people nowadays still pay with cash and payment cards and plastic will not disappear overnight but the trend is also showing a huge increase in online and mobile transactions, whether In-App payments or online payments the mobile channel is gaining more and more popularity.

Another benefit of Apple and also Samsung is the simple utilization of their systems. Normally adding a new card is extremely easy and don´t take much time and you don’t need many steps to activate the payment process. Furthermore you are also able to simply make online payments and In-App payments with these payment systems. So far those solutions sound like the perfect trial to perform mobile payment transactions at a POS and in addition to that also on the mobile channel.

But will those systems also expand as we expect? Right now only the US market seems to be the best starting point for a market entry, although also other countries will follow in the next month. Tech giants also have to consider legal aspects, payment infrastructures, and have to distinguish between different consumer behaviors which vary from region to region. It definitely will take time until the whole globe is ready to pay without cash and physical cards.

 

Conclusion

Most activities we can see nowadays in the mobile payment industry have been initiated by Apple, Google and payment schemes whether it’s Apple Pay and its clear statement to use NFC and an embedded secure element, Google´s HCE which has been introduced to allow software based payment systems or Tokenization introduced by payment schemes which is a method that replaces the Primary Account Number (PAN) by a token to ensure a secure data transfer of your payment card information. With these statements they always set a clear direction which technology to use.

We can see indeed a huge competition between those three giants but they have one thing in common, they want to create the next level of service for their users and therefore they continuously try to expand their portfolio and enter new markets. This strategy makes it difficult for companies which operated in the payment industry for ages. With Android Pay as a payment platform for In-App and In-Store payments, Google wants to make mobile payment available for everyone who wants to integrate it into their Android solutions. With their power and feigned openness Apple and Google let nearly everyone participate in their systems. But if you pay with your smartphone you always have to keep in mind you will pay with Google or Apple and not with brands you have used to pay in the past….

The role of Financial Institutions

Today we are looking at the role of Financial Institutions. As mentioned in the previous articles beside Mobile Network Operators, Payment Schemes and, retailers; Financial Institutions want to have a piece of the mobile payment cake.  And they have good arguments to be a mobile payment solution provider in the future and to offer their customers the next level of mobile services.

Retail Banks have been the single touching point for any kind of Financial Services in the past. During the second part of the last century more and more new services and new companies entered the market and threatened their market position. In the online payment business, banks are losing the single touching point, but of course people still use credit or debit cards for online payments.  However, they normally pay via PayPal or AliPay instead of using payment methods offered by Financial Institutions.

But why is this the case? Banks still have one big advantage over others…Trust. Customers trust their bank brand more than they trust online brands. But with their size, innovation, power and fewer regulations to consider, online companies have a competitive advantage over Financial Institutions.

Nevertheless banks are also able to offer a striking mobile payment user experience beside their existing financial services portfolio, either for IOS or Android operating systems. And most of the populace are missing the point that Android is much bigger than IOS. This comparison leads us to the cloud payment approach of Android devices. Googles latest KitKat Version includes HCE which stands for host card emulation. With regards to cloud payments, HCE will be used to securely provide and store payment card information in the cloud and unlike Apple´s secure element approach to be physically on the mobile device. The HCE Cloud Payment approach could be a great opportunity for banks to act independent from Apple and also mobile network operators.

Coming back to Apple. With their brilliant payment system they offer contactless, online and In App Payments, Apple combined three different type of payments in one single system for various debit and credit cards of different Financial Institutions. With an embedded secure element Apple distanced itself from the mobile network operators favored SIM based solution, which is great news for banks. Now they know that they are able to offer a Mobile Network Operators an independent solution.

In my opinion one financial institution will not be able to offer different card products of different institutions within one single banking app. As more and more people begin using more payment cards of different providers, Apple, Samsung and Google will always have a competitive advantage over card issuers.

But for their customer loyalty and brand awareness it is crucial to enter the mobile payment market and not only participate in Apple Pay, Samsung or Google payment systems.

 

Conclusion:

As in nearly every industry, the financial sector is seeing major changes in consumer habits and the competition landscape. More and more online companies are entering established markets and forcing the shift into the digital world. They are counting on an enhanced user experience and consumer convenience of established processes, which we can also see in the payment market with Apple´s payment system. Due to that reason Financial Institutions are about to lose their single touching point which had existed for ages. We can see very interesting and promising approaches of banks all over the world. Especially Canadian and Australian banks are very innovative and are leading the race in mobile payment solution provided by Financial Institutions. The most promising approach right now for us is the CommBank App of the Commonwealth Bank of Australia (CBA). In our opinion the CBA is one of the most innovative banks in the world and they have already started to expand their existing portfolio with mobile payment solutions.

In general Financial Institutions will have to find a way to combine their existing services like mobile banking and person to person payment with mobile payment solutions to offer their customers a payment experience throughout their whole portfolio.