NEW YORK – Google announced last week that they’ll be launching their own mobile wallet, known as Android Pay. When it launches, there will be one big difference between their service and their competitor Apple Pay: Unlike Apple, Google won’t get a cut of the interchange fees on transactions.
According to a Wall Street Journal report detailing the matter, Google could be missing out on one of the primary ways that Apple has been able to monetize its mobile payments service. According to industry experts, the reason Google won’t be able to earn those same fees is due to the new terms of services that have come with pressure from credit card issuers.
When Apple launched their mobile payments system, issuers were lining up to link their product with the famously successful and innovative brand. Because of this, Apple had the power to set their own rules.
Android Pay is in a totally different situation, according to a report from Pymnts.com. But, while they don’t stand to garner revenue from the interchange fees of each transaction, the “no fee” provision of Android Pay might eventually give Google an edge. However, some question that logic, since the competing payments are platform-based, and a user is not likely to make the decision of iPhone versus Android phone based on the mobile wallet function.
“This is an interesting situation, as Google’s entrance into the market makes mobile payment a ‘dot-com landgrab’,” said Conexxus Executive Director Gray Taylor. “Android Pay will likely put pressure on ApplePay for merchant acceptance and Google will almost certainly find a new way to drive revenue once they hit ubiquity.”
The reason that this is even news at all, according to sources cited by the Wall Street Journal, is that the major payment networks — Visa and MasterCard — recently implemented their tokenization card security service, making it free. That also prohibits payments services providers from charging issuers.
The fees Apple imposed on bank issuers weren’t ever popular, but feeling the pressure to keep up with the competitive mobile payments landscape, Apple was able to convince financial institutions the fees were worth offering the service.
Android Pay, which doesn’t have a set launch day, will allow consumers to pay via their mobile device in store using NFC technology. Android Pay will work with any phone that has an NFC chip installed and will run on KitKat operating systems or newer. And like Apple Pay, it has embraced partnerships with all four card networks – Amex, Discover, MasterCard and Visa – in an effort to make account provisioning easier.