10 Sep 2015
Big news for 50+M Android phones with NFC in the US. Expect to see a very fast international expansion to this as well.
Why is this big news?
- Payments are now in the OS (see blog). This is a PLATFORM not a just a “wallet”. If you compare Android Pay to Apple Pay the user experience is not quite a good, and most would ask (logically) what is different than the Google wallet launched 4 years ago. Under the covers the new AP “changes everything”. Google’s approach to security (Trust Zone, tokens, authentication, Host Card Emulation,…) and management of secure credentials has moved into the Android OS. Google Wallet (not mentioned in this PR) is an app that uses the standard Android Pay APIs at parity to any other wallet. This means that Google could care less about “wallet”. Can banks create their own app that does payment? Yep… Can a retailer? Yep.. can a health care provider store secure credentials? Yep..
- Google is the “open” platform for Banks and Retailers to innovate on. As I’ve stated before, the objective of any platform (and network) is to have millions of people investing to build value. Payments work very very well… Google is approach is to let consumers and merchants decide what they want to do… and we will provide the “reference implementation” (See Open Innovation, Structural Changes in Payments). This first release works on Android KitKat 4.4 and above. The next release (within Android M) will bring about some massive security changes (TEE/Trust Zone) that will render other apps like SamsungPay obsolete. Google Android and Apple iOS are working to establish an identity brokering role that is FAR MORE VALUABLE than any role in payments.
- Google is creating a PLATFORM for a new mobile ECONOMY (see blog). If you were a bank or a merchant what mobile platform would you invest in? There actually isn’t another choice… Apple is not a platform.. Apple wants to define, own, and brand the consumer payment experience. Apple has chosen NOT to create a platform. As I mentioned in blog above, this platform effort involves 5 primary vectors:
-Enable Android as the secure platform (SE Linux, Trustzone)
– Incentives for all to invest in commerce “network / platform”
– Improve physical world insight/data collection to enhance targeting and attribution
– Capture and manage consumer identity
– Create/enhance consumer engagement platform for commerce
- ApplePay volume is leveling off… yes it is still growing, but usage is not taking off. I still believe that the ApplePay experience is the best consumer mobile payment experience ever designed. But it does nothing differently than my card. Actually my card swipe is faster. Perhaps it is muscle memory.. Apple has gone back to big issuers asking them to for transaction notification (ie “Amex like experience”) as today banks have not provided. Bank response? This is funny…. Banks said “sure we can do that.. but lets first tear up that 3 yr 15bps agreement and talk about what you will pay me to make that work”. Apple’s consumer base is just amazing, but they are a TERRIBLE PARTNER (see my blog). ApplePay has managed to alienate both Banks (15bps) and Merchants. They listen to no one. Alternatively AndroidPay is like a set of Legos… build what you want..
- 50M-60M phones turned on at once. While Android demographic is 3x the phones.. they are at the bottom of the spending quartiles. But there is power in numbers, particularly given the fact that merchants are very reluctant to do anything the doesn’t help all of their customers. Remember the first Google wallet was limited to Sprint and Citi (GW 1.0) the next enabled all issuers (proxy card) but mobile operators still did not support (GW 2.0). In this latest iteration Google acquired the US MNO wallet consortium Softcard and has their buy in. Additionally when Android M rolls out.. all payments will go through them (Sorry Samsung I told you so).
- Tokenization/VDEP/MDES. This is the first major rollout post VDEP/MDES with 0 bps for “wallet” providers. In an odd twist, google is going to market with only a handful of banks as it requires a marketing bilateral for marketing spend. One issuer told me the fee was $10M.. ! wow.. So if you want your card art on.. and Google press you must pony up the money. If not.. your card will work otherwise.. same issuer registration process as with ApplePay.
- Beats SamsungPay and the new ApplePay update to market (more on this next week). AndroidPay completely kills SamsungPay (see my blog with Loop CEO depating with me). Samsung is not built on Android M.. so all the user interaction for card registration will have to be done all over again when redeployed on Android M.. unless Visa and MA do the work of reissuing tokens during the OS upgrade. SamsungPay may have an edge on AP on user experience.. but this product is 4 years too late to market (the MST Loop Stuff). The idea of it launching just before the EMV Oct date is just plain silly. One retailer brought up the idea of putting a lead/iron sticky strip on the terminal (over mag head) to keep it from working.