Apple Pay and Google Wallet: Mobile Payment Going Mainstream
When Apple announced on September 9, 2014 that the iPhone 6 would be equipped with a mobile payment system appropriately called Apple Pay, the entire mobile payment universe woke up. Although competitors had existed for years, none had gained considerable traction. In fact, within a month of releasing Apple Pay, Apple proclaimed to be bigger than all mobile payment competitors combined, including Google Wallet.
Google Wallet was launched on May 26, 2011 to minimal fanfare, due partly to the fact that it initially worked only with a Citi MasterCard or a Google prepaid card. Although that changed on August 1, 2012, when Google Wallet began to interface with all major credit cards, the downloads of Google Wallet three years later still had not crossed the 20 million threshold, despite there being 89.4 million U.S. Android users as of July 2014. (Google apparently does not release the precise number of Google Wallet users.) Apple Pay, on the other hand, boasts that it registered a million credit cards within only 72 hours of launch, with numbers rapidly increasing as the iPhone faithful upgrade their devices.
Although Apple Pay and Google Wallet are similar in use, Google has a few extra handy functions. With each system, the user uploads debit and/or credit card information to their phone ahead of time. Apple works with most banks, and Google Wallet works with any bank. At checkout with either system, the user will hold their phone next to a near-field communication (NFC) tap-to-pay device and either put their finger on the fingerprint ID button (on the iPhone 6) or type in their Google Wallet PIN (on Android devices running 4.4 KitKat or higher).
But Google Wallet has two features that Apple Pay does not currently offer: the ability to send money at no cost to friends (like PayPal) and the ability to upload and use loyalty cards and gift cards.
When it comes to security, Apple Pay has a unique approach. Like your bank, Google Wallet stores credit card and personal information on encrypted servers. However, Google also records information about your purchases, the stores you visit, and even your geolocation. Also, unlike Apple Pay, retrieving information from Google’s cloud-based servers requires wifi or cell service.
As we discussed in a prior post, Apple Pay achieves security by using a “token” system and does not store or share credit card information or track purchase history, making it less valuable to hackers and retailers’ R&D departments alike. Also, the fingerprint scanner on the iPhone 6 (while it is already being duplicated for Android phones) is more difficult to bypass than the Google Wallet PIN.
Holiday Surge (or not)
Partly because the iPhone 6 was often wrapped in a gift box up until the holidays arrived, the little data available do not seem to reflect a great surge in mobile payment usage quite yet. What research from ITG (Investment Technology Group, Inc.) does show is that, in November 2014:
- Apple Pay was responsible for over 1% of global digital payment dollars. In comparison, Google Wallet accounted for only 4% of digital payment dollars despite a few years’ head start. The industry leader, PayPal, accounted for 78% and its most direct competitor for accepting (as opposed to making) mobile payments, Square, accounted for the other 18%.
- In a good sign for Apple Pay, roughly 60% of new Apple Pay customers used the app on multiple occasions and on multiple days. That averages out to roughly 1.4 Apple Pay uses a week per customer and is better than the 20% recurring users logged by PayPal.
Despite what may seem like marginal holds on the mobile payment market, analysts view these numbers as quite promising signs that Apple Pay and Google Wallet will gain significant ground as each becomes more widely adopted by expanding internationally and by users upgrading their smartphones.
The Near Future of Mobile Payment
By Q4 2015, Apple Pay and Google Wallet are expected to receive a fortuitous bump in the number of retailers equipped with NFC checkout devices, all because of something called EMV. EMV technology is the combined effort of Europay, MasterCard and Visa (hence, EMV) to increase payment card security by installing small chips within the actual card, which you may have already seen on your own recently-received cards. JCB, American Express, China UnionPay, and Discover have all joined the initiative. On October 1, 2015, credit card issuers will shift fraud liability away from U.S. merchants that implement EMV, thereby incentivizing retailers to invest in NFC checkout devices. Fortunately for Apple and Google, the shift to EMV also ensures that the NFC infrastructure necessary for mobile payment will become widely adopted in the U.S. Because EMV is already used throughout most of the world, for the growing legions of Apple Pay and Google Wallet users, the world will soon truly be at their fingertips.