Android Pay will allow companies to add a mobile payments option to their app, to which users can upload credit card or debit card information, so that payments become single-tap transactions within the app. In addition, a company adopting the Android Pay API will be able to allow tap-to-pay transactions in brick-and-mortar stores. This function will rely on Google’s Host Card Emulation (HCE), which makes it easier for third-party apps to take advantage of Android phones’ Near Field Communications (NFC) chips.
As opposed to Google Wallet, the Android Pay API will be “built from the ground up” for Android developers, using HCE.
The source said that Google didn’t have any partner companies at this point and that Google Wallet will continue to exist as a separate entity and will be supported by Android Pay. That is, it will be easy, if not automatic, for a customer to link his or her Google Wallet account to third-party apps that are running Android Pay.
Of course, Google Wallet currently offers APIs like its “Instant Buy API,” which allows Android developers to drop a “Buy with Google” button in their app. It’s unclear whether Google Wallet APIs will be phased out after Android Pay comes onto the scene. (Of course, Ars has noted before that Google’s product strategy seems to be “make two of everything.”)
Still, the advantage would be that customers don’t need to go through Google Wallet if they prefer not to, and third-party merchants will have an open platform API to drop into their apps.
Google Wallet currently lets users upload any credit or debit card they have and essentially uses that card to buy those users a prepaid “virtual card” with which Google pays merchants when a user makes a payment. This is done for liability and business reasons, and reports suggest that it costs Google a small fee every time a user makes a purchase through its app. Still, Google considers a mobile payment platform valuable because it can gather user information, which it can use to deliver ads more effectively.
Ever since the launch of Apple Pay in October 2014, companies from all sides of the ecosystem have been vying to get a bite of the mobile payments space. Apple Pay itself has seen success, capturing more of the market than Google did on its first stab at mobile payments when it launched Google Wallet in 2011. The emergence of Apple Pay on the scene also gave Google Wallet a boost, too, with a 50 percent increase in the number of transactions on Google Wallet per week shortly after Apple Pay’s launch.
A December comment from Apple suggested that it supported cards that represented 90 percent of the card-based transaction volume in the US. Although Apple Pay adoption is limited to the number of people with iPhone 6 and iPhone 6 Plus models, mobile payment transactions have reportedly been increasing, with recent Business Insider research showing that “payments made through Apple Pay accounted for between 0.1%-1.6% of transactions at five top retailers in the month following the launch of the feature.” While that seems like a tiny fraction, it’s good progress for a brand new platform in its first month.
Google also announced its purchase of key SoftCard (formerly Isis) assets just two days ago. SoftCard had been launched by a coalition of mobile carriers after Google Wallet’s own launch in 2011 with the aim of giving Google a run for its money. The assets that Google purchased reportedly consisted of “some exciting technology and intellectual property.” In addition, Samsung recently purchased LoopPay, an all-in-one wallet device that uses Magnetic Secure Technology (MST) to mimic magnetic stripe cards.
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