2015 is quickly becoming the year of mobile payments. Apple and Google are continually making headlines as the two Goliath’s square off in a battle for mobile payment supremacy. Coming off the most profitable quarter of any company ever, Apple’s CEO Tim Cook stated in their annual earnings call that Apple Pay is still “in the first inning” and that 2015 was going to be a big year. With similar timing, it has been reported that Google is in talks to acquire the mobile payment competitor SoftCard, which uses nearly identical technology as Google Wallet. But, despite the constant buzz in the media, it’s apparent that many consumers still have no idea how the two function or how they differ.
NFC - the unifying theme
The main similarity between Apple Pay and Google Wallet is the underlying technology that both payment options are built on – Near Field Communication or NFC. NFC is a form of short-range wireless communication that allows smartphones and other devices to communicate by touching them together or bringing them within close proximity to each other (usually within a few centimeters). Although the transaction process is slightly different, both platforms allow consumers to make payments by holding their smartphone near a NFC-compatible payment terminal.
So, how are they different?
Although both mobile payment options utilize the same technology, the user experience, transaction processing and privacy policies are what set the two apart.
Device Usage: Apple Pay is only available to consumers with iPhone 6, 6 Plus, and the Apple Watch. This can greatly hinder consumer adoption, but impressive iPhone 6 and 6 Plus sales in the U.S. has squashed a lot of the negative speculation. Google Wallet on the other hand is available on both iOS and Android platforms through the Google Wallet app. This gives Google a much broader potential customer base and could lead to greater product adoption, however Google has yet to see the number of users it had projected.
User Experience: Apple is known for creating a seamless user experience across all their products, and early usage reports show that Apple Pay is no exception. While Google Wallet (and most other mobile payment options) requires the user to unlock their phone then enter a pin to complete a transaction, Apple simplified the entire process. When an Apple Pay compatible device gets within range of a NFC-enabled POS system, the device automatically ‘wakes up’ and opens the Passbook application. From there, the user can complete the transaction with Touch ID by simply placing their finger on the scanner.
Transaction Processing: One of the major benefits to mobile payment options is the increased level of security against credit card fraud. Apple uses a tokenization process in which each transaction is assigned a unique ID as opposed to sending the actual card data. Apple has essentially created a proxy for each individual transaction which prevents the passage of the important card data. Google’s approach is slightly different in that Google Wallet assigns a MasterCard number that is unique to your phone. The MasterCard number acts as a virtual credit card and when you use it to pay Google then charges the debit or credit card on file. Despite their differences, both systems prevent fraudulent transactions from being made as any data that is transferred cannot be used again and therefore useless.
Privacy: In the wake of recent data breaches and network hacks, data security and privacy have been a hot topic in the mobile payments world. Mainly, what data is captured and how is it being used?Tim Cook stated Apple’s view perfectly when he said “We believe that customers have a right to privacy… there's no reason why anyone, or us, need to know where you're buying something, what you're buying, how much you're paying”. This is an extremely powerful statement in an age where consumer data is constantly being hijacked and used maliciously. Also, the fact that none of the transaction data is stored eases concerns of iCloud hacks, which have been highly publicized in the last year.Google’s approach is a little more intrusive. When a user makes a purchase with Google Wallet, Google can see what users buy, where they buy it from, and how often they buy from certain places. Google is very vague about what they can and will use this data for, but one could infer that their advertising platform could greatly benefit from such data. In a world where privacy seems to be slipping away from consumers, Google’s approach on data collection could be one of the main reasons why they don’t win the mobile payments battle. Although Google and Apple aren't the only two companies vying for mobile payment market share, given their resources, they seem to be two of the most likely to succeed. We'll be watching closely and reporting on new development and the drama ensues.Do you have any questions about mobile payments? Leave a comment below and we'll be happy to answer!
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