Android Pay Google Wallet with NFC

Google Wallet was the mobile wallet pioneer in the US in using NFC technology. However due to lack of partnerships and the telecom providers unwillingness to install the wallet as part of the new phones being sold, it did not see early mainstream adoption.

After the launch of Apple Pay, Google did a major reboot to their wallet initiative and was able to broker a partnership with Softcard (who is now defunct) to acquire some of its IP, and is planning to re-launch the wallet and the Payments API platform.

Strengths:

• Google is planning to launch its new platform for payments (loosely named as Android Pay) as a payment API rather than a proprietary offering. This allows Google to open up the API to device manufacturers and developers to build wallets that may result in mainstream adoption.
• Android has a very healthy user base in the US and the rest of the world. Its user base also tends to be younger and more of a digital native.
• By separating the Android Pay mobile payments API and the Google wallet the proprietary offering, Google is opening up the playing field for more innovation. This may allow financial institutions to finally integrate payments into their mobile banking offerings, which has always been a longstanding pipe dream.
• Google has not openly revealed its intentions of how it would use host card emulation (HCE) in this mobile payments/wallet strategy. There is a very good chance we may see HCE being integrated into the Android Pay API to support phones which do not have an NFC radio/Secure Element built in. The Android OS provides built-in support for HCE since its Kit Kat release

Weaknesses:

• Apple Pay already has launched and gaining momentum, while Android Pay has not been officially released. This late entry into the market may impact market share.
• Design by committee hardly produces mind blowing user experiences. We will have to wait to see how Android Pay will be integrated into a variety of mobile payment offerings and how the user experience will stack up against Apple Pay.
• The success of the revenue share scheme Google has promised the Telcos to pre-install Google Wallet in newer handsets needs to be proven after product launch.

Opportunities:

• Android has an 80% worldwide market share. With an open API approach, Google is betting on sheer volume of its user base to make this payments solution a success.
• After the API launch, financial institutions may be able to integrate this into their mobile banking offerings, providing a more seamless payment experience and increasing loyalty when combined with their rewards programs.

Threats:

• Even though Google Wallet was launched first, it does not have the first mover’s advantage compared to Apple Pay in terms of adoption because early launches were ‘false starts’ from a broad user acceptance perspective.
• The ARPU (Avg. Revenue. Per User) for Android is one quarter of iOS users according to a Benedict Evans analysis. This poses the question of how many Android users may actively use the mobile payments/wallet.
• In developing nations (like India and Africa), the notion of direct carrier billing is very frequently used in payments. It would be interesting to see how the new Android Pay API may work with that model.
• With Android’s open model and fragmented ecosystem, the success of Android Pay may not be imminent.

Analysis: Android Pay maybe late to the party, but it may provide a challenging alternative for Apple Pay after its launch. The open API model may allow integrating payments into variety of devices, real world use cases, and applications like mobile banking. The success of this is something we will have to wait and see.