Following up on our weekend story about the slow adoption rates for Apple Pay, news has surfaced that could be both positive and negative for Android Pay.
Visa and MasterCard recently standardized their “tokenization” card-security service and made it free, preventing payments services from charging fees to issuers.
According to the Wall Street Journal:
Tokenization swaps cardholder data such as account numbers with a unique set of numbers that validates a customer’s identity. Merchants never get the actual card data, eliminating one avenue for online data theft.
This new service is free, so it means Google won’t be able to get the same 0.15% transaction cut that Apple currently gets. Since banks were scrambling to get on board with Apple Pay, Apple was able to use its strength to negotiate that percentage. Apple’s contracts run another 2 years, for a total of 3. Once that term expires, Apple may be forced to renegotiate the terms with the banks. This new no-fee arrangement with Android Pay may give the banks more leverage in negotiating with Apple.
The fact that Google will not be getting a percentage of each transaction is the bad news for Google. However, the new transaction rules do not preclude banks from making marketing and licensing agreements, so it is possible that Google may be able to recoup some costs through those types of deals.
The good news for Android Pay? Without the fees, more card issuers will be likely to sign on to Android Pay, thereby hopefully speeding the rate of adoption into retailers. Two of the biggest reasons retailers cited for hesitating to expand into mobile payments were lack of access to customer data in the transaction, and hardware upgrade costs. If more card issuers are signing on to Android Pay, it’s entirely possible that they could help cover the costs of hardware upgrades. This could in turn put more pressure on Apple to cut or even drop their percentage fee, and we could see a rapid expansion of the acceptance of mobile payments. Ultimately, this plethora of choice would benefit us, the consumers.
What’s your take? Would you be more inclined to use mobile payments if the options were everywhere you shopped? Let us know in the comments!Source: Wall Street Journal