According to a survey by the Auriemma Consulting Group (LONDON, July 28, 2015 GLOBE NEWSWIRE), 42% of the US iPhone 6 and 6+ owners have used Apple Pay which was just launched in the U.S. on Oct 20, 2014. Apple Pay has also been launched in the UK on July 14, 2015.
Popularity of mobile devices brings attention to another phase of e-commerce development. Mobile payment methods are being developed to make online transaction quick and easy. For consumers, they provide convenience and more security. For merchants, they reduce cart abandonment. The releases of Apple Pay and Android Pay, though providing extra options for online transaction, contribute mostly to offline or retail-store transactions. For offline merchants to accept mobile payments, a ‘contactless’ payment-capable point-of-sale terminal is required. The credit card terminal are provided by merchant services providers.
All these efforts aim at providing convenience to mobile device users, though they also add extra security by the use of fingerprint in authentication. Apple Pay is currently only available for iPhone 6 (Plus) and Apple Watch. Adding significant new features to their newer models not only entices existing customers to upgrade (hence make more sales), but also is an incentive for competitor’s customers to switch over. Android, as the major competitor of Apple, obviously has to catch up quickly. Android Pay is expected to launch later in 2015.
Security of Mobile Payment
These mobile payment solutions (Apple Pay, Android Pay, etc.) also contribute to transaction security because they use the Near Field Communication (NFC) technology. They store consumer’s encrypted credit card information on a chip in user’s smartphone. The chip communicates with a ‘contactless’ terminal to transfer the data. The technology works much like bluetooth. However the working distance for the NFC is only in centimeters (<20cm) while bluetooth works in the ranges of meters (50m-100m). The short distance contributes to the security measure.
On the other hand, the use of Apple Pay or Android Pay at a credit card terminal requires some type of authentication, either a password or a fingerprint. This is obviously more secure than swiping a credit card at a cashier register. What makes the NFC technology more imminent is the many recent consumer data breaches (http://www.cnet.com/news/home-depot-probes-possible-customer-data-theft/) at some major retail stores.
Android Pay v.s. Apple Pay
Android Pay (announced in May, 2015) seems to have an advantage because the app does not require the most advanced devices other than the Android M operating system which is to be released in the fall of 2015. (Apple Pay requires newer models of devices for fingerprint authentication.) Android Pay accepts a PIN code, password, or pattern to authenticate a transaction. AT&T, Verizon, and T-Mobile will pre-install Android Pay on phones when the service is ready.
Differences Between Android Pay and Google Wallet
The differences between Android Pay and Google Wallet (launched in 2011) are the data storage and application. Google wallet stores credit card info in user’s Google accounts while Android Pay stores the information on user’s device. The data on mobile devices and NFC enable transactions at credit card terminals. For e-commerce transactions, Android Pay sends the data from the mobile device while Google Wallet sends them from Google cloud. Google Wallet is mostly for online transactions while Android Pay work for both online and offline transactions.
For e-Commerce Merchants
Android Pay is a free API service provided by Google, just like Google Wallet. Android M, the new android operating system due to roll out in late 2015, will enable users to authenticate mobile payment by fingerprint. Android M is expected to work with NFC-equipped devices with Android 4.3 and above. For merchants, the difference between Google Wallet and Android Pay is equivalent to the use of a point-of-sale terminal and a virtual terminal.
As of July 31, 2015, the latest major release of Android is 5.0 ‘Lollipop.’ According to netmarketshare.com estimate, Android 4.3, 4.4 and 5.0 occupy about 30% of the mobile devices while Android 4.2 or lower account for about 17%. In other words, of all the Android device users, Android M will not work for 17/30 or approximately 56% of the Android devices.
For e-commerce merchants the buy with Google button for Google Wallet is still a keeper.