Google Pay, the new streamlined brand for paying with Google, in store, online and in-app
Is it a grab for market share from Apple and Amazon?
Could the changing regulatory environment entice the tech giant further into financial services in Australia?
Point of View
Google Pay is the new streamlined brand for all the different ways to pay with Google, whether in store, online or in-app. The Google Pay brand will replace Android Pay, Google Wallet, be used in the Play store, Google apps and on websites. Early signs of roll out here are being seen on Australian phones.
Google is not just streamlining its payment brand, it is streamlining the process of paying itself. It has automated the Google Pay onboarding process. An individual who sets up an account and registers their card details with any of Google’s ‘touchpoints’ (e.g. Google Play, YouTube, Chrome, gmail) automatically creates a single account that can be used across all Google platforms.
A user need never download the Google Pay app to be a Google Pay user. But the app does provide a convenient one-stop-shop for users’ cards, gift cards, loyalty and purchase history.
Google is more than a household name; indeed it has become an eponym for ‘search’. But its payments brand/s… not so much. Google launched Google Wallet in 2011, then in 2015 it rebranded its NFC service Android Pay, but retained Google Wallet for P2P transfers. Now it has brought everything back under one roof (although Google Wallet will be temporarily be called Google Pay Send).
Two birds, one stone?
Could Google be vying for market share in both payments and e-commerce from Apple and Amazon? Apple Pay is an obvious competitive target. Both Google Pay and Apple Pay can be used in any physical store that accepts NFC, and to authenticate online transactions (although only with their respective merchant partners). Moreover, Apple is all about branding. So it makes sense that Google has introduced a sleek new brand with a consistent customer experience.
In terms of payment function, Apple has control over the hardware, operating system and software underpinning Apple Pay. Conversely, Google uses open-sourced systems and therefore needs to contend with a variety of hardware and software components that are outside its control. To overcome this obstacle, Google has moved some of the most secure parts of its payments system to secure cloud services, thereby reducing software requirements to a few simple API calls. This means that in theory, Google Pay could work on Apple hardware.
Nevertheless, Apple Pay is more secure. It relies on a hardware-based secure element in the phone to locally authenticate the user with their fingerprint. As such, the user must have their phone in their possession when they make an online purchase, including when purchasing from a computer.
Google Pay, on the other hand, uses software-based host-card emulation, where users are authenticated in the Google cloud. Accordingly, users can pay with Google Pay from any device, so long as they are logged into their Google account. Google typically takes a layered approach to authentication, which can be risk-based, single or multi-factor, and can comprise one or more methods (for example, passwords, biometrics, geolocation).
Amazon Pay is only available for online purchases on Amazon and its third-party merchant sites. Similarly to Google, Amazon Pay can automatically access cards linked to users’ Amazon accounts. (Amazon Go uses QR codes in store, but transactions are still technically online.) Both Amazon Pay and Google Pay generate revenues from merchants (while Apple charges fees to card issuers) suggesting that Google could rival Amazon in the online retail space.
Payments are known to be ‘sticky’. Perhaps Google is seeking to use its new brand to keep customers on its platforms and attract merchants as clients to assure its primary revenue stream: online advertising.
In Australia, around a quarter of consumers used mobile payments in 2017, up 14 per cent from 2016, according to Deloitte. Apple Pay was the most popular of ‘the Pays’, having twice as many users as Samsung Pay and 1.5 times as many as Android Pay (now Google Pay). If Google Pay does becomes available on Apple iPhones, could its market share increase further?
More importantly, could this be the latest step in Google’s apparent strategy to expand into, well, everything? In particular, could we see Google move further into financial services in Australia, taking advantage of the wideranging regulatory reforms underway in the Australian financial sector?