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What’s up with Android Pay?

Paying with mobile closer to ubiquity

Bank tech trends can make your head spin. So each week longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.” Bank tech trends can make your head spin. So each week longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.”

To ubiquity, and beyond!

With apologies to “Toy Story,” the insertion by Google of Android Pay into the mobile payments mix, jump-started by Apple Pay, could augur the acceleration of acceptance by many more users and merchants.

Up until now—or at least this summer when Android Pay actually rolls out—Apple Pay owned the only horse in a one-horse town. Apple Pay, in fact, was and is a prime selling point for its new phone and watch models—partly because the other major mobile phones lagged way behind. Either they didn’t have it (Samsung) or what they did have (Android Wallet) left everybody cold.

But Apple, as big as it is, constitutes only a fraction of the total number of mobile phones ambling through malls, restaurants, stores, etc. So, the theory goes, many merchants have been loath to invest in the time, expense, and basic educational ramp-up to make the mobile phone NFC work.

Besides, old-fashioned plastic still works fine.

That theory could be ripe for change, according to some observers.

Android Pay attracts attention

“Feature-wise, Android Pay is nearly identical to Apple Pay, with transactions made via NFC on proximity payments, which are authenticated by PIN or biometrics on capable devices,” says Gilles Ubaghs, senior analyst at Ovum. “For most merchants who already accept Apple Pay, Android Pay is a natural extension that will broaden the market.”

Daniel Kline, writing for The Motley Fool, observes that “Android Pay and Apple Pay not only have similar names, they both run on the same technology.”

That means, he says, “This isn’t an Apple Pay killer so much as it is an Apple Pay clone. The addition of tens of millions of potential NFC payment-equipped customers should push more stores to adopt the technology. Android Pay should create a bigger market for mobile payments and that will be good for both companies and their customers.”

All that sounds good—again in theory—but hold on.

Ovum’s Ubaghs concludes with a flock of caveats:

“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 United States. 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 United States, but there is nothing in the announced details of Android Pay to suggest any surge in take-up in the near term.”

Still, though, one must put “near-term” in perspective. In the digital world, the “near-term” generally means maybe the next six months. The “long-term” could be as short as two years. That’s within the time frame of many corporate strategic plans.

Card companies react to Android Pay

In any case, the card companies are responding to the phenomenon of mobile device payments in ways ranging from the simply reactive to the fundamental—and the latter could be as meaningful as the Pay products themselves.

Discover, so far, is in the reactive mode, with a simple statement: “Adding Android Pay expands Discover’s ability to enhance the convenience and experience for its mobile users,” says Heather Roche, vice-president of rewards.

MasterCard and Visa have used the Android Pay announcement more proactively, with each touting what they call their “digital enablement service.”

“Mobile payments are here today, and are now an essential part of the core value proposition for new devices,” says Ed McLaughlin, chief emerging payments officer, MasterCard. “With the MasterCard Digital Enablement Service and Android Pay, we can now use secure tokens to easily enable payments from a consumer’s connected device.”

Visa really expands on this concept, claiming that it “adds a turn-key, toll-free commercial framework accessible to more than 14,500 Visa financial institution clients and leading technology partners around the world. Google, with its Android Pay payment solution, is Visa’s first international program partner.”

Specifically, the digital enablement services seek to”

• Make integration fast and easy.

• Provide a no-cost commercial framework.

• Provide robust security and consumer data protection.

• Operate at international scale and reach.

All of which sounds like progress, if not in the near term, then at least in the longer term, toward allowing new approaches, such as Apple Pay, Android Pay, and presumably, Samsung Pay a much better chance of catching on than in the haphazard launches of the near- and long-past.

Lurking issue that won’t go away …

All that said, however, one other point needs to be emphasized at the outset. Security. One major, widely publicized security breach of a big-name merchant or bank, through a clearly defined mobile payments system—and everyone goes back to square one.

Cindy Provin, vice-president of global security, Thales e-Security, makes the point cogently:

“The mobile device creates a tremendous opportunity for the payments industry (and banks in particular) to deliver significant innovation in customer engagement, but only if they get security right. The problem is that mobile devices are widely seen as being untrustworthy and often make it hard to protect the data that is stored in them or entered by the user.”

So, as the various mobile “Pays” start to get off the ground, it’s important to embrace the hard-earned lessons of the past.

Let’s all hope that happens.

Sources for this article include:

Android Pay Is Coming To Discover Cardmembers

MasterCard Powers Android Pay, Bringing Mobile Payments To Android Device Owners

Can Google's Apple Pay Knockoff Android Pay Compete?

Analyst View: Android Pay Not A Game Changer

Visa Announces New Commercial Standard for Mobile Payments

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected]

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