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Google Launches Pay With Google for the Mobile Web

By Evan Niu, CFA - Oct 23, 2017 at 2:08PM

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Can the new payment service put a dent in Apple's lead?

Alphabet ( GOOG -0.13% ) ( GOOGL -0.12% ) subsidiary Google announced in May at its annual I/O developer conference that it was working on a new payment service for mobile devices. The search giant is now launching its Pay with Google service, which promises to streamline the payment process.

Pay with Google is different from Android Pay, Google's contactless mobile payment technology for Android devices that can be used at retail locations. Users will be using credit or debit cards already stored in their Google account to pay, and payment information like shipping addresses will be automatically transmitted. Developers can integrate Pay with Google directly into mobile apps as well as mobile websites. The new service is comparable to Apple's ( AAPL 2.50% ) Apple Pay on the Web, which launched last year.

Person using Pay with Google on an Android phone

Image source: Google.

Show me the money

Google is also aggressively offering the service for free and will not charge any transaction fees, much like Android Pay. Apple doesn't charge merchants any additional fees to implement and accept Apple Pay, but it does reportedly earn 15 basis points from card issuers on all Apple Pay transactions.

That's a big difference in the underlying economics of each respective payment service. While undercutting Apple's 0.15% cut could make Android Pay more appealing to developers and merchants, it also hinders its sustainability. The predecessor of Android Pay, Google Wallet, was a money pit precisely because Google did not charge fees, which contributed to its demise. The service doesn't have to be a profit center, but at a minimum should at least cover its operational costs. Lacking fees, Google is essentially subsidizing usage, which can't last forever.

It's also a bit odd that Google is using different branding for each service (Android Pay vs. Pay with Google). You'd think that the company would have learned its lesson regarding fragmented branding at this point.

Apple Pay expands its lead

The news comes as Apple Pay chief Jennifer Baily spoke at the Money 20/20 conference in Las Vegas over the weekend. Baily noted that Apple Pay is now available in 20 markets, which collectively represents a whopping 70% of global transaction volumes. The service comprises 90% of all mobile contactless payments processed in those markets.

On the August earnings call, CFO Luca Maestri said that momentum for Apple Pay is "strongest in international markets where the infrastructure for mobile payments has developed faster than in the U.S." Approximately 75% of all Apple Pay transactions occur outside of the U.S. and Apple Pay is the No. 1 NFC-based mobile payment service, according to Maestri.

There's no shortage of mobile payment services these days (even Fitbit just jumped in with Fitbit Pay), but Apple Pay has emerged as the clear leader to beat.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Alphabet Inc. Stock Quote
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Apple Inc. Stock Quote
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Alphabet Inc. Stock Quote
Alphabet Inc.
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Fitbit, Inc. Stock Quote
Fitbit, Inc.

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