How Android Pay changes Mobile Payments–and why you should care


Now that details regarding Android Pay have emerged, I thought it would be interesting to contemplate on how key mobile payments “ecosystem builders” as I term them, stand with respect to the on-going mobile payments game. Here is the State of Play in the Mobile Payments Game, post Android Pay


The latest move is Google’s announcement of Android Pay at the Google I/O conference today. This allows customers to pay at retail stores by simply unlocking their phone, without the need to open an app, in a “Tap and go” experience. Loyalty programs and offers can be applied at checkout. Also the contactless terminal receives not just the payment details but also loyalty points and offers.

Assuming things go to plan as per announcements, here are my thoughts on where players are positioned.



The Prize

Over 2014 to 2016, the mobile commerce market is set to grow by a factor of five. This is 10 times faster than the E-commerce market. But by 2016, with less than 500 million mobile payments users, and a market worth $600 billion there is ample scope for further growth. PayPal recently announced that while online and mobile shopping accounts for $2.5 trillion in annual retail sales, with the convergence of the online and physical world, a unified world of commerce could be worth $25 trillion, resonating arguments I made in my book “The Digital Money Game”.


Key Players

The current scene of the battle is playing out in the US with heavy-weights placing large bets on paying by mobile phone.  Big players currently making investments include Apple, Google, PayPal, Samsung, Facebook, Visa, MasterCard, MCX and others. Also there are several mobile payments providers who have obtained some traction in the market and may now be up for grabs.

Some have folded their hands – Softcard (formerly ISIS) was recently acquired by Google, as an important precursor to their current play, as now handsets from AT&T, Verizon and T-Mobile can come pre-loaded with Android Pay.


Key Enablers

Once an area dominated by mobile operator SIM-SE standards, the dam has burst and we have a number of possible technologies emerging. Samsung’s embedded approach recently announced is similar to eSE introduced by Apple for ApplePay and both work with tokenization services of card schemes. HCE and tokenisation hybrid models first introduced by Google for Android Kitkat (4.4) have since resulted in the launch of a number of pilots around the world. Meanwhile QR Codes have seen good traction, being behind some of the best adopted services, such as the Starbucks Wallet.

Now Android Pay says their service is secure as they won’t send your actual credit or debit card number with each payment. Instead a virtual account number represents the account information. Android Device Manager is to allow consumers to instantly lock their device from anywhere, secure it with a new password or even wipe it clean of personal information. 


Country Positioning

Apple Pay is still largely US only, although reports have emerged from Singapore of people successfully using their Apple Watch to make payments there. Android Pay has a huge potential in terms of reach but for now nothing much seems to be clear in terms of when it will launch outside of the US. While Apple benefits from premium user status, in terms of sheer numbers , once the gameplay extends out of the US, Android is better placed in terms of penetration.

US is pulling ahead, but China, India will not be far behind as they develop apps to meet the requirements of the US and then seek to bring out cheaper and more appropriate services for Asian and emerging markets. Europe though risks being left behind in all this, pity, with it (arguably) being the birth-place of e-money.


Customer Adoption

Recent reports claim $2 out of every $3 spent using contactless payments across Visa, Mastercard, and American Express were being made with Apple Pay.  

PayPal now with Paydiant seeks to challenge this thanks to Paydiant’s earlier work with MCX.  This month PayPal reports it processes nearly 12.5 million payments for customers every single day.

Now Android Pay promises to offer better ease of use than Google Wallet, benefiting from support for fingerprint authentication in Android M. Also with pre-loaded handsets the only challenge that remains is having led the horse to the water, to actually get it to drink: as several steps will still be needed before customers actually make their first mobile payments transaction.

Samsung Pay though claims potential acceptance at 30 million merchant locations worldwide, with near universal acceptance thanks to Magnetic Secure Transmission (MST) magstripe emulation platform, LoopPay.


Reactions from the rest of the ecosystem

Merchants are signing up to many of the new services, whilst also engaged in MCX and so far tending to favour the QR Code approach.

Schemes are not taking sides. Visa, MasterCard, American Express and Discover have announced support to Android Pay, as also with other services. In general schemes are keen to support all options, something that brings joy to their investors.

Mobile operators are on a back foot, but regrouping – more co-operation, greater focus on transport (such as Mi-FARE) where they still hold an advantage, and a continued emphasis on security – though biometrics, tokenisation and the passage of time will leave this argument somewhat weakened.

For now banks can play with the different providers, but where will they invest and how long will it take them? The banks in the US are moving quickly – USAA and US Bank have already declared their support for Android Pay. Citibank had been quick to provide the support needed by Google Wallet.

Regarding processors, for Android Pay Google is partnering with Braintree, CyberSource, First Data, Stripe and Vantiv to make integration easier. There is a huge opportunity from tokenisation which is up for grabs and processors need to also back every horse, while continuing to build the required infrastructure.


Outlook for Mobile Payments

This further confirms the growing fragmentation, with potentially myriad implementations as service providers seek to navigate a murky minefield of patents relating to mobile payments, and still bring out something that helps maintain some control over large, desirable customer segments.

What is quite clear though is that massive disruption to existing business models is now well and truly on the cards. Current retail, banking and payment systems must consider their roadmaps as payments becomes invisible, embedded, transparent and often free. The future of payments is in the cloud, but could this result in massive “honey pots”?

When will Android Pay, Apple Pay, Samsung Pay and PayPal’s newest services launch across Europe, UK, Canada, Australia, Poland Germany, Singapore and other countries ripe for these services? And where does Android Pay leave Google Wallet? A lot of important, yet unanswered questions that will become clearer in the next few months perhaps.


Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

PayExpoSpeakerLogoI'm speaking on “Role of mobile in omni-channel payments 

June 10 at 13:30 at PayExpo 2015 Mobile Money Europe, London.

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Facebook aims to grab a chunk of the US Money Transfer market


Facebook is to launch P2P Money Transfer from Facebook Messenger, online and via Android smartphones. By the end of the year people in the US will be able to send money with no fees, using a Visa or MasterCard debit card.

If Facebook has not yet made it big in payments, this is not for want of trying. At Shift Thought we've monitored a number of failed launches associated in some way with trying to get social users on Facebook to make payments. So what do we expect to happen, and what’s at stake? Read on!




What’s Proposed

Facebook Payvment launched in March 2011, claimed to be the number one social commerce platform on Facebook, attempting to reinvent online shopping leveraging social conversations. In January 2013 Intuit acquired the Payvment team and closed down the Payvment platform.


Past Experience

Perhaps the best known was Facebook Credits, a virtual currency launched in July 2010 that was available in over 15 currencies including US dollars, Pound Sterling and Euro. This was offered as a secure way to play games and buy digital content on Facebook. While we were expecting this to eventually extend to music, movies and more, as Facebook announced a share in their 2011 revenue of 15%, this was not to be. In June 2012 Facebook announced any credits would be converted to native currency and the service phased out by 2012.

Facebook Card launched in January 2013 as a reusable gift card supported by Sutton Bank. At launch Facebook has over a billion users worldwide, with 618 million active each day. Have you heard much about Facebook Card, or considered it for gifting? Probably not.


Why won’t people bite and will this change?

Why have more people not adopted services that in theory had everything going for them? Why did Amazon close their WebPay P2P Service? Why has Google's gmail money transfer not yet become more used? For me the answer has come through my chats with consumer focus groups over the years. It seems people were not ready to trust Facebook and other social media providers with their money yet. Yet in February this year millions of Chinese used Tencent's WeChat messenger app to send traditional Red Envelopes digitally.

So as Facebook has not had much success in breaking through into payments, what's different this time? In two words: David Marcus. As Chief of Facebook Messenger since June 2014, Marcus brings a wealth of understanding of the money transfer business from his days as President of PayPal.


Who is likely to be impacted?

Domestic money transfer in the US is a core business for the three world leaders in money transfer, Western Union, MoneyGram and Ria Financial Services (Euronet). In April last year MoneyGram shares took a beating on an announcement that Walmart would do this business through Ria instead, with the launch of Walmart-2-Walmart at more than 4,000 stores.


How much is the market worth?

In 2014, market leader Western Union generated revenue of $5.6 billion. Consumer-to-consumer revenue from North America constituted 19% of this, so I estimate US domestic money transfer revenue for Western Union to be $1 billion. Home to over 46 million international migrants, the US is the largest Send Country for remittances, and both domestic and international migrants form an important part of the money transfer market. While international remittances is going to prove a harder market for Facebook, actually domestic remittances outside of the US is a very hard market for international money transfer operators anyway.


What to expect next

For me money transfer via social media could be set to take off. So it's not just Facebook. Expect to hear more from Skype, Viber and all the various messenger apps that have been taking the Asian markets by storm. Definitely a space to watch! What do you think? Do share your thoughts on this rapidly evolving space.


Charmaine Oak is Author of The Digital Money Game 

and co-author Virtual Currencies – From Secrecy to Safety

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn