Google gets back into mobile payments with Android Pay

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Google has reintroduced itself into the mobile payments market with Android Pay, a system it hinted at in March during the Mobile World Congress in Spain and a couple of weeks after the company purchased the assets of the now-defunct mobile wallet, Softcard.

While Google did not specify which, if any, Softcard features are present in Android Pay, the company’s presentation at its annual I/O developer conference in Silicon Valley had an air of familiarity to it. To steal a line from the quotable baseball legend Yogi Berra, it was déjà vu all over again.

“Android Pay arrives on the scene and in many ways it has the look and feel of its aspiring rivals, Apple Pay and Samsung Pay,” Michelle Evans, senior consumer finance analyst at Euromonitor International, told Mobile Payments Today in an email. “It will leverage NFC technology [and HCE support] and enable merchants to accept mobile payments in-store from participating consumers, as well as enable merchants to embed Android Pay directly into their mobile apps. It also will support fingerprint readers for users to authenticate payments at checkout in the same vein as Apple Pay.”

Even some of Google’s initial Android Pay retail partners are similar to what Apple announced late last year: McDonald’s, Panera, Whole Foods, and Uber are among a group of 40 retailers and service providers who are supporting both in-store and in-app payments.

Target is one of the first retailers to support fingerprint-based, in-app Android Pay purchases.

American Express, Discover, MasterCard, and Visa all announced support for Android Pay. In Visa’s case, it announced Android Pay as the first partner to participate in the Visa Digital Enhancement Program. The program “connects financial institutions and technology companies to simplify and accelerate the roll out of new payment and commerce services,” according to a press release.

USAA and U.S. Bank are among the first major card issuers to announce support for Android Pay.

“The fact that there is some similarity in their approaches shows mobile payments are beginning to be standardized, and I think that this is rocket fuel for mobile wallet adoption in general,” John Haro, chief technology officer for mobile marketing company Vibe, told Mobile Payments Today in an email.

Not an Apple Pay clone

One of the key differences right now between Android Pay and Apple Pay is a rewards system.

“[W]ith select retailers, your loyalty programs and special offers will be automatically applied at checkout,” Pali Bhat, Google’s director of product management, wrote in a blog post. “For example, when you tap to buy a Coke at a vending machine, your MyCokeRewards will be automatically applied. With Android Pay, the contactless terminal not only receives your payment info, but also your loyalty programs and offers.”

Some Apple Pay users have been asking for a similar rewards program ever since the system debuted last year, and they’re about to get their wish. The New York Times reported on May 27 that Apple will announce new Apple Pay features, including a rewards program, in June 2015 during its software conference.

“Very soon, consumers will see compelling new features with Android Pay and Apple Pay beyond just replacing the plastic credit card,” Haro said. “Once we have accepted mobile payment as the norm, people are going to beg for the same level of convenience from all the things that take up space in their old leather wallet: offers, loyalty cards, and much more.”

Another key difference between Android Pay and Apple Pay is the on-boarding process for payments cards added to the mobile wallet.

Google will use what worked with Google Wallet — a virtual prepaid debit MasterCard for in-store purchases. In this way, none of the consumers’ card information is stored on the phone.

Speaking of Google Wallet, that system will live on as a dedicated person-to-person mobile app for both Android and iOS devices.

Android Pay is due to arrive on handsets later this year to coincide with Google’s launch of an updated mobile operating system, which at the moment is referred to as Android M.

“Now Android Pay works on phones from KitKat 4 but, with the M release, Android Pay gets even better because it turns out that Android device makers have been including fingerprint sensors on devices since 2011,” Dave Burke, vice president of engineering for Google, said during the I/O conference. “In M, we’re taking the opportunity to standardize support for the fingerprint in Android so it works across a breadth of sensors and devices and exposes a standard API to developers.”

Android Pay will eventually become a standard feature on future AT&T, Verizon and T-Mobile smartphones thanks to the Softcard acquisition. That will set up an interesting showdown on Samsung phones between Android Pay and Samsung Pay, which at the moment is limited to the company’s latest Galaxy line of smartphones.

“Another big unknown is how Android Pay and soon-to-be launched Samsung Pay will compete for the overlap within their respective user bases,” Evans said. “Undoubtedly, these two dueling wallets will lead to mobile wallet confusion in the Android ecosystem.”

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