Google (GOOG 0.20%) (GOOGL 0.31%) actually beat Apple (AAPL 0.87%) to the punch with its mobile payment system.
The only problem is that Wallet, the search giant's effort to turn your smartphone into a credit card replacement has failed to catch on with either consumers or retailers. Now, the company has revamped its efforts and rebranded its payment system as Android Pay.
Under the new moniker, which was introduced at the company's annual I/O developer's conference, Google plans a big push for the mobile wallet at retail and for use online or in apps. It's a bold initiative and one that puts the company up against Apple Pay -- the first mobile payment effort which actually seems to be gaining some consumer traction.
It's the same technology
If a store wants to use NFC for any mobile payments, it pretty much has to accept all of them according to Rob Pegoraro in USA Today.
A look at Android Pay Source: MasterCard
That, in turn, should explain why CVS and Rite Aid couldn't just reprogram the NFC readers in their stores to refuse Apple Pay; they had to shut them off entirely to opt out of Apple's version of the technology in a questionable attempt to stall its momentum and leave room for a future mobile-payments system called CurrentC. Android Pay and Apple not only have similar names, they both run on the same technology.
The payment systems use near field communication to securely transmit payments to stores equipped with readers. Though some companies would have you believe otherwise, an NFC reader sees all communication from NFC-equipped devices the same way. That means a store that accepts Apple Pay should take Android Pay whether it wants to or not.
This gives the new Google effort a solid base of stores which should accept Android Pay even if they don't know that they do.
How does Android Pay work?
Like Apple Pay the search giant's payment system requires little more than unlocking your phone and holding it up to the NFC reader. In Apple's case you then have to scan your fingerprint and in some cases Google could require a passcode (or a fingerprint as new Android phones with that technology are released).
The payment is authorized like a regular credit card swipe, but the retailer never actually gets you credit card information. This should offer increased security and it might be the answer to some of the data breaches which have harmed a number of major chains.
The new system does include some changes from Google Wallet, reported Ars Technica.
Probably the biggest step away from Google Wallet for Android Pay will be the use of tokenization to transfer card details from a merchant to a bank. This open standard was popularized by Apple Pay last fall and is seen as more secure than other methods of transferring card information because the merchant and the issuer trade numbers that represent a person's real card number rather than the card number itself.
What Android Pay users won't be able to do is keep a balance as they can with Wallet. Instead, the device must be linked directly to a credit or debit card. Because of that Google Wallet won't entirely disappear as it will still be offered as a way for users to keep a balance on their phone or tablet.
How is Google launching Android Pay?
Android Pay will be accepted at more than 700,000 retailers across the U.S. that have NFC-equipped registers, GeekWire reported. "In addition to the retailers, Google is partnering with Visa, MasterCard, Discover and American Express for Android Pay. It also signed deals with T-Mobile, AT&T, and Verizon.
The best thing for Google here is that it does not need to make a major push to get retailers to adopt NFC -- Apple is already working on that. Instead it can focus on customer awareness that Android Pay works anywhere Apple Pay does.
This will work
Apple Pay has been gaining in popularity and Google is smart to knock it off. Because Apple's payment tech requires use of one of its devices, it's not something that an Android phone or tablet user could adopt. In theory the lure of mobile payment could cause someone to switch to an iPhone, but short of that Apple Pay was never a competitor to Google.
Now the search leader has an answer to Apple Pay and has put its devices back on par with the iPhone and iPad. This is a better-late-than-never move, but it's a smart one because Apple did a lot of the heavy lifting in getting consumers and retailers on board.
This isn't an Apple Pay killer so much as it is an Apple Pay clone. The addition of tens of millions of potential NFC payment equipped customers should push more stores to adopt the technology. Android Pay should create a bigger market for mobile payments and that will be good for both companies and their customers.
