Google's Android Pay Takes Aim at Apple Pay

NEW YORK ( TheStreet) -- Consumers may swoon for Android Pay, the new mobile phone payments tool from Google - even though it amounts to a mild update of the failed Google Wallet, which consumers by the tens of millions ignored. That may seem paradox, but it also is fact.

Yet the big question for consumers will be: should they chuck their iPhone to climb aboard Android to get Android Pay?

Android Pay is the big news coming out of Google's recent I/O rally for developers. What we know about Android Pay is that it will be accepted at a projected 700,000 physical stores when it debuts in the fall, according to Google. But it really is not new.  Android Pay just is Google Wallet, which was introduced by Google in summer 2011 and sunk like a rock. It worked fine and was accepted at a few hundred thousand retailers. But, for the most part, banks ignored it, so did retailers - which needed fancy so-called contactless terminals to accept it - and because there was no place to use it, so did consumers.

Google never released Google Wallet statistics but most experts have believed the numbers were anemic.

So why is Google killing off Google Wallet in a few months - it will be reborn as a person to person payments tool à la Venmo - and debuting Android Pay? Because Apple Pay happened, and, suddenly, mobile payments moved from the obscure techie fringe into center stage. The launch date for Apple Pay was October 2014, and it promptly blew away Google Wallet, because Apple is just better at marketing.

And yet Apple Pay is the big reason experts say Android Pay has a chance where Google Wallet had none. "Apple Pay created market demand for mobile payments," said Brian Day, a mobile payments expert with credit processor TMG in Iowa. Bluntly put, Google Wallet was too early. For Android Pay, the time is now, because Apple Pay has created consumer demand and it does not work on Android. That set the stage for an Android mobile payments tool to succeed.

Day acknowledged that, "Android Pay will look minimally different from Google Wallet." The biggest difference in user feel: with Wallet, to pay, a user has to open the Google Wallet app to initiate the process. That's not necessary in Android Pay, which effectively puts Android Pay on a par with Apple Pay.

Another change with Android Pay: it will build in so-called tokenization of data, according to Pali Bhat, director, product management at Google. That means the data about credit card number, expiration date, and so forth is invisible to the store and also to any data thieves. Apple Pay offered tokenization from the start so now Google is even in that security fight.

Probably, too, just about every retailer who accepts Apple Pay will also accept Android Pay, said experts. Score it even.

Lastly, Google may be getting the jump on Apple Pay by creating ways to build in loyalty and rewards programs into Android Pay. That's a plus for Android Pay. But rumors are plentiful that Apple will announce loyalty as an Apple Pay feature soon.

The bottom line is - Android Pay looks remarkably like Apple Pay. "The functionality of Android Pay is very similar to Apple Pay, and that is a smart move by Google," said Jared Isaacman CEO of point of sale terminal maker Harbortouch. "Apple has already done a lot of the heavy lifting in terms of consumer and merchant education for Apple Pay, and Android Pay can now benefit from those efforts."

So why else is the likelihood high that Android Pay will succeed? It will come pre-loaded on the majority of Android phones sold by three major U.S. mobile carriers. According to Google's Bhat, "We are also working with major U.S. mobile carriers (AT&T, T-Mobile, Verizon) to help ensure that when you buy a new Android phone, you can walk out the door ready to use Android Pay."

Call that a byproduct of Google's purchase, early in 2015, of much of Softcard, née Isis, the failed mobile payment technology created by AT&T, T-Mobile and Verizon.

Before, users had to find Google Wallet in the Play store, install it, then activate a credit card. Now only the last step is needed and, said multiple experts, that ups the chances that Android Pay will succeed.

So is Android Pay compelling enough to jilt iPhone? Probably not. "We don't see mobile payments platforms driving device selection yet," said Day, which is a fancy way of saying that, thus far, it is improbable that a hardcore Apple fan will jump to Android because of Android Pay or vice versa.

Day added: mobile payments are growing -- they probably are the future at retail -- but, right now, they remain a minor blip on the retail screen. That means that in 2015 consumers won't buy phones based upon payment preferences. But a few years from now? Maybe, said Day, maybe they will.

-Written by Robert McGarvey for MainStreet

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

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