Android Pay’s Push Beyond Payments

When the news of Android Pay’s launch broke in June, MPD CEO Karen Webster made a case about why Android Pay wasn’t really about payments at all.

Six months later, it seems that assertion is coming to fruition.

In a recent interview with Webster, Pali Bhat, Google’s Director of Product Management for Android Pay, gave an update about how Android Pay has evolved in the crowded mobile payments space — and explains why he believes “we are getting closer to the [mobile payments] tipping point.”

Since the news of its launch, however, what we’ve learned about Android Pay is that it is, in fact, less about the app itself, and more about what the app can power.

That’s of course, about powering commerce and connecting people to commerce opportunities via apps that make the user experience seamless, more secure and faster.

While that’s what the mobile pay players at Apple and Samsung have also pitched, Bhat said thinking about Android Pay as less of a payments app in a mobile operating system and more of a commerce platform is what separates it from others vying for first place in the rapidly expanding mobile commerce ecosystem.

“We’ve taken a fundamentally different approach than the rest of the players by using a platform approach. We are not saying we need to control end-to-end experiences. …We were talking about a platform,” he said. “Android Pay is an ingredient that can be part of an app experience and the various commerce platforms and the solutions delivered by other ecosystem partners, whether it’s banks that want to add Android Pay to their apps or merchants that want to add Android Pay to their apps.”

In fact, Bhat went as far as to say that Google doesn’t even want to force consumers to use Android Pay if they want to find another way to pay with their Android device. 

“What we do want them to do is use Android Pay in the context of any of these apps. Android Pay is fundamentally about choice,” he explained.

Developing that mindset has been what’s defined the year for Android Pay, which only has been available to consumers since September.

“For us, the year 2015 was really the year of laying the foundation for payments at Google. For the first time we have a broad partnership with players across the ecosystem — the banks, the payment networks, merchants, payments processors, app developers, payment terminal vendors, etc. — and I think it’s been tremendous to lay this foundation,” Bhat explained. “I really think of this as doing all of the hard work to establish the groundwork for where we want to go in the future.”

Google’s Payments Future

Google has made two recent announcements in the past week that indicate its intentions for next year.

First, it announced plans to join the Australian market in early 2016, an accomplishment that its opponent in the iOS ecosystem has been unsuccessful in enabling given its business model (which is to take a cut of interchange fees).

Another critical announcement was that Android Pay can now be used for in-app payments in the U.S.

“It just demonstrated again our focus on partnering with the ecosystem and bringing all the critical players on board to our platform so we can jointly deliver value to users,” Bhat said.

That last part is key since the biggest anchor holding back mobile payments has been the difficulty in convincing users that there is value to swapping out their phones for plastic cards in physical stores. But Bhat said Google’s efforts to lay a foundation that’s focused on technology, banks, partnerships, merchant relationships and consumer engagement has helped steady Google – and Android’s Pay course.

“I see 2016 as using the models that we’ve created as a new platform approach for payments,” Bhat said.

But 2015 hasn’t shown Google’s full hand about what its platform offers, Bhat assured, saying that the next few years will be pivotal to its overall mobile commerce strategy. Android Pay, he added, should be in multiple continents in 2016. And Google plans to do so by “establishing this underlining foundation and framework that we are creating for all the ecosystem, and jointly with the ecosystem so that we can deliver these solutions to the user.”

But, of course, as most things in payments — that’s easier said than done.

Citing a past conversation with Webster about consumer adoption surrounding mobile payments trends, Bhat noted that “payments is a very, very sticky habit.”

But what did he and Webster mean by that exactly?

“It’s something that users do all the time. It’s something that’s connected with money,” Bhat said. “Having users change their habits it going to be challenging for all mobile payments vendors. I think that’s spot on. The way we think about having users change their behavior is it really has to be to multiple touch points of the user where they get comfortable with the fact that this is something that they can touch that is secure, and convenient and will work when they use it.”

Making The (Use) Case

Making a use case for mobile payments hasn’t been easy, mainly for the sheer fact that it’s hard to pitch to consumers about why it’s better to pay with a phone. The user experience, in theory, is perceptively better — but that’s not the reality of how consumers have reacted to mobile payments.

For in-store payments, of course, mobile payments isn’t really changing the experience. It’s still standing in line and paying — but with a phone instead of a card. The mode of payment often makes no difference to the consumer and changing old habits is hard to crack for mobile payments providers, especially without a strong use case.

That’s where mobile order ahead and in-app payments have begun to make their market. Android Pay’s push into the in-app payment, unlike in-store options, blurs the online and offline world and conditions consumers toward mobile payments without those consumers having to think much about the payment process at all.

Perhaps the mobile pay consumer adoption has been a slow burn in 2015, but Bhat expects 2016 to heat up — but not always at the pace the mobile companies would hope for. Developing use case beyond payments and more toward what those payments enable from the user experience is what Google is focusing on developing. 

But that won’t happen overnight.

“It is actually going to take some time, at least for some users, to change their payment habits in stores — because it’s so deeply engrained and we do need to get more and more merchants to adopt it,” he said. “2015 has been tremendous in working through the support of the stores [where] support for tap and pay payments and Android Pay increased tremendously.”

Still, he recognized there’s a long way to go toward mainstream adoption. And it’s going to vary by market since every country is at a different level of acceptance for mobile and contactless payments. Australia, for example, could prove to be a strong market for Android Pay for the simple fact that the market has already shifted heavily toward contactless payments.

“There are a handful of markets where I believe it is natural for users to use tap and pay payments,” Bhat said. “But even in the United States, where it is not yet a habit for users to use tap and pay payments, the interesting thing here is I feel tremendous momentum for in-app payments.”

Google’s approach with Android Pay has been about understanding how to scale its mobile payments service through a thoughtful execution. This means understanding that gaining ground in the mobile pay world means making the right connections across the payments ecosystem. Finding strategic partners in the bank, payment processing and merchant space has been one way it’s created an environment for scale, Bhat said.

“I feel partnering with the ecosystem and seeing more and more innovative use cases be available to users — because they are ultimately the ones who are matter, not those at Google who are building the solutions,” he said.

Room For More Than One?

But just because Google is vying to be a major mobile pay player in the crowded space doesn’t mean it wants to be the only player. As Webster noted in their conversation, there won’t be one player who comes out on the other side of the mobile pay race that’s often found pitting Google, Apple and Samsung together. Instead, Bhat said, it’s about being the player who enables other players in the ecosystem to make payments better.

“We don’t think that Google should be the only player trying to create the end-to-end experiences. We believe that the ecosystem can actually partner with us and in a way that works with the platform we are creating. The best part about the platform that we are creating is that not only is it open, but we’ve also created it in a way that the economics are completely favorable for the ecosystem,” Bhat said.

“Because of that approach, we feel that we will see much more uptick, and we are not talking about tens of apps support Android Pay, we are talking having umpteen number of apps supporting Android Pay because it’s in their best interest,” he added. “We’re going really, really deep in each market to ensure we’ve created a regional platform that all partners can use to innovate with payments.”

Despite what Bhat believes sets Google’s vision for a mobile payments future apart, he admits that even the tech giant, like others in the market, are only scratching the surface. 

“I think we’re still very much in the age where we are going to see a lot of opportunities amount in pay solutions,” Bhat said.

For Google, their hope is that partners see the value in its vision of what enabling mobile commerce really means.