14 DAY TRIAL // At the I/O 2015 conference a few weeks ago, Google unveiled Android Pay, its own simple and secure solution for paying with your Android phone.
A new report coming out this weekend from the Wall Street Journal reveals that Google will not charge any fees for the transactions operated under the service. The decision might put a lot of pressure on the competition, forcing companies like Apple to drop their respective charges.
Apple Pay launched in 2014 and secured partnerships with banks and other credit card companies, which entail the latter to receive 0.15% of the value of each credit card transaction. Apple in turn receives half-cent per purchase on bank debit cards.
By contrast, Google won’t be taking a cut from Android Pay transactions. The report citing sources familiar with the matter explains that the reason behind the decision is that VISA and MasterCard, two dominant payment networks, have recently standardized their so-called “tokenization” card-security service and made it available free of charge. So payment services are prevented from charging any fees to their users.
Google might need to find an alternate way to make Android Pay profitable
Tokenization is a security feature that works by virtue of a unique one-time token when presented with a credit card’s info. Since Google will use the tokenization provided by VISA and MasterCard, it will have to follow the rules imposed by them.
Apple, on the other hand, has its own tokenization process and has fees in place with both banks and issuers.
Android Pay is expected to arrive in Q3, and Google says the service will be accepted at over 700,000 store locations from major brands across the US and in over 1,000 Android apps. But more will be coming soon.
With Android Pay, users will be able to make mobile payments via merchant contactless terminals, but the service can be used for online purchases as well.
The new paying service is expected to make it out into the wild along with Android M later this year. Initially, the service will be available in the United States. There’s no word on the availability in other countries, but more info will probably be available after Android Pay becomes available in America.