WEST PALM BEACH, Fla. — Last year's launch of Apple Pay changed the conversation regarding the reality and popularity of mobile payments, and Android and Google are stepping up to the mobile payments plate in a showdown that could be a win for credit unions.
While Samsung Pay and Google Wallet had their proverbial hats in this all-important ring, Apple streamlined the credit card-to-token processes via client iTunes accounts. As a result the company has gained more exposure via merchants and customer participation.
Google's recent announcement of the soon-to-be-released Android Pay may have changed the payment playing field. The new offering will not replace Google Wallet, rather it will become a default payment solution for the Google Play store and in-app purchases.
Additionally, with the EMV adoption date slated for October 2015, merchants will be pressured to offer point-of-sale terminals that accept EMV. Many merchants will likely opt for terminals that also accept NFC (near field communication) transactions, which support Google Wallet and Android Pay.
"Android Pay has positioned itself as a payments platform, which includes the involvement of third party developers that can use the platform to integrate payments into their own apps, mobile banking included," said Brian Day, director of Digital Strategy for The Members Group (TMG), a processing and payment solutions firm.
Baxter Credit Union's Chief Information Officer Jeff Johnson sees Google's new offering as a step in the right direction; however, the destination remains unknown.
"At a macro level the introduction will continue the push towards mobile payments," said Johnson, who also serves on the CUNA Technology Council. "At the micro level it introduces yet another layer of complexity and consideration that further clouds how CU's should address mobile payments."
With a handful of popular mobile tokenization payment platforms, Android Pay can almost be lumped in with the other "pay" solutions. However, Day said Apple has some cause for concern.
"I think that calling Android Pay a better offering may be premature. However, based on the information Google has shared so far, Android Pay's loyalty component includes features Apple Pay does not," said Day. "That said, Apple Pay is rumored to be announcing its own rewards features soon."
Among features unique about Android Pay is its ability to interface with varied vendors. "With Google's open philosophy around Android, it works to create an openness that allows developers latitude," said Day. "So this may create additional options for flexibility as compared to Apple Pay."
The Wallet Perspective
Android Pay, Samsung Pay and Apple Pay aren't the only games in town, especially in the credit union industry. CU Wallet, structured as a CUSO, allows CUs to adopt, deploy and manage mobile device banking, payments and security solutions. The company's CEO, Paul Fiore, said he welcomes Android Pay to the field.
"It's great to see Google add tokenization to increase security of payments in Android Pay. Anything that makes payments more secure is a positive step," said Fiore. "CU Wallet and Apple Pay also use highly secure tokenization processes, and we are big believers in that approach."
Fiore explained that Android Pay is estimated to work with roughly 70% of available Android phones. Conversely, Apple Pay works primarily on iPhone 6 and 6+.
"CU Wallet is built upon the Paydiant platform, which works on practically all Android and Apple phones," said Fiore. "Consumer choice is always a good thing."
Best Innovation Group (BIG), one of CU Wallet's partners, is an industry think tank supporting technological innovations that serve the financial industry. Founder John Best agreed with Fiore that Android Pay is a step in the right direction.
"I think for once that Google has followed the Apple model, which is too hang back and wait then improve on something," said Best. "The fact that Apple Pay doesn't have any integration points is an issue, and I also was really surprised that they didn't get the live balance on the cards. They obviously have some access because they pull back the last transactions."
While both Apple Pay and Google Wallet purport to have upwards of 700,000 participating retailers, a fraction of all retailers, mass consumer adoption has yet to be realized for the new payment rails. Best mentioned that Android Pay's API (application programming interface) is being looked at by popular transport companies, Lyft and Uber, which could be a game changer.
"This is why PayPal has always done so well, they built their empire on a solid API," said Best. "I think Android Pay is a good move and will foster innovation in the fintech/payments space."
The Play and Pay Game
As this latest round of the tokenization wars continue, TMG's Day noted that some 25% of the firm's issuer clients have transitioned or are in transition to Apple Pay. He expects the metric to rise to 50% by mid-year.
"TMG has been advising financial institution clients to enroll credit and debit cards in Apple Pay and will continue to advise clients to enroll in mobile payments products that make sense for their individual digital payments strategies," noted Day.
With Apple Pay he said there are "pros" that include: great user/member experience, improved security over card payments due to biometrics and tokenization and a successful move to market. Conversely, he said "cons" include: merchant acceptance rate, that credit unions largely don't control the experience and a lack of rewards/loyalty integration.
"It is clear payments are on the front end of a shift from physical cards to digital payment form factors such as phones and watches. Proactive issuers will have an advantage in terms of educating membership and lessening their own learning and processes curve as they go through enablement," said Day. "Additionally, top-of-wallet will be key in the digital age, and those that are early to offer solutions serve a better chance of achieving the much desired default or primary card status.
Baxter CU's Johnson agreed that top-of-wallet is the goal of every credit union, but when it comes to tokenization he said a balance has yet to be struck between being proactive and reactive.
"It is highly unlikely there will be a single solution—or even less than 10 solutions," said Johnson. "So we need to figure out how to embrace the diversity in offerings while not giving away the trust relationship with our members."