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With Android Pay, Google Closes Gap With Apple In Mobile Payments

This article is more than 8 years old.

Apple vaulted ahead of Google in mobile payments last September when it announced Apple Pay, its long-awaited entry into mobile payments. By comparison, the three-year-old Google Wallet looked tired and limited.

Now, Apple's head start has nearly vanished. Today at its I/O conference in San Francisco for software developers, Google introduced Android Pay, a successor to Google Wallet that, when it launches this summer, will come close to matching Apple Pay for making payments via smartphones easy in stores and inside apps.

They won't quite be identical. Apple Pay's security system is somewhat different, and Android phones won't have fingerprint identification like Apple's until the new version of Android comes out this summer, and even then only on phones that have fingerprint I.D. capability. But they'll be close enough that consumers should be comfortable using either one in largely the same way--and at the very same 700,000 store locations that have the right checkout terminals.

Although Apple currently boasts more banks, Android Pay has the support of payment networks Visa , MasterCard , American Express, and Discover, as well as card-issuing banks Chase, Citibank, Capital one, and U.S. Bank, with more no doubt to come.

That's a big step forward for Google's mobile payment ambitions. A competitive mobile wallet is key for the search giant because the ability to pay with a couple taps on a smartphone will grease the e-commerce skids for app developers and marketers alike.

If you're tuning into the mobile payments business recently, you might wonder if Google is simply copying Apple. Actually, it's more the other way around. Google pioneered the idea of tokenization for card security, notes Dana Stalder, a general partner with the venture capital firm Matrix Partners and a former PayPal executive, but the payment networks weren't ready to settle on standards. Google Wallet also used the same Near Field Communications radio technology Apple Pay uses for contactless payments, but merchants had no incentive to upgrade checkout terminals. "They were just too early," Stalder said in an interview.

To its credit, and showing its exquisite sense of technology timing, Apple swooped in at the right time after Google had laid the groundwork. In addition, the payment networks set a deadline of October 2015 for upgrading card checkout terminals to new, more secure technologies. Although that won't actually happen at most retail locations for several more years, Apple could sense the momentum building. What's more, payment networks and banks have now embraced tokenization.

In some ways, Google may even move ahead of Apple in mobile payments--depending on what Apple announces at its own developers conference starting June 8. For one thing, says Osama Bedier, who helped build Google Wallet and now is CEO of payment terminal maker Poynt, it's possible more Android phones will be able to use Android Pay than iPhones can use Apple Pay. Android phones for years have been built to accommodate mobile payments, while only iPhone 6 models (and iPhone 5s in conjunction with the Apple Watch) can use Apple Pay.

Android Pay also might be more flexible to use. It will work with some 1,000 apps initially with more to come, and Android Pay will be able to work directly through bank apps, if consumers prefer to use them. Google is even trying out some interesting new payment schemes beyond Android Pay, including an early prototype of hands-free payment.

Still, none of this means Apple is losing any ground where it matters--with consumers. The fact is, if you own an iPhone (a recent one, at least), you'll use Apple Pay, and if you own an Android phone, you'll use Android Pay. Either way, you'll get about the same result.

The upshot is that Google has just cemented a duopoly everyone assumed was likely anyway. "Operating systems have the advantage," says Bedier.

The only wild cards left are veteran payment firm PayPal, soon to spin out of eBay, and possibly Samsung Pay, which uses a technology that allows payments to be accepted at existing checkout terminals. But as of today, it looks like Google and Apple are the ones to beat.

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