How Google Is Innovating To Gain An Edge In Mobile Payments
Recently Google (NASDAQ:GOOG) announced that it is piloting an app called Hands Free which allows its mobile payment (Android Pay) users to pay in stores quickly and completely hands-free, through a voice command. The company stated that with this pilot, it wants to explore what the future of mobile payments could look like. The app is being piloted in the San Francisco area and is being rolled out to a small number of McDonald’s, Papa John’s and local eateries in the area. As Google focuses on launching Android Pay in several countries in 2016, increasing the convenience of mobile payments via Hands Free could give it a competitive edge and increase adoption. Google’s technology can provide enhanced security and convenience for the feature; however, user and retailer adoption is key for its success.
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Mobile Payments: High Growth Potential, Adoption Is Key
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The mobile payments industry is currently in a nascent stage, but with huge potential for growth. eMarketer estimates that 31% of U.S. smartphone users will use proximity mobile payments (tapping, waving and similar functionality) by 2019, compared to an estimated 19% figure for 2016. The value of mobile payment transactions is expected to increase from $27 billion in 2016 to more than $200 billion by 2019. According to a recent survey by Accenture, while only 18% of North Americans use mobile payments on a regular basis, 52% are “extremely aware” of the service. Increasingly popular with the younger generation, 23%of millennials use contactless payments at least once a week. Google’s Hands Free feature is poised to improve the convenience of mobile payments significantly. Users need to simply tell the cashier “I’ll pay with Google” to execute the transaction. The Hands Free feature will use Bluetooth low energy, WiFi and location services on the user’s phone to detect if the user is near a participating store. The cashier will confirm the user’s identity by using the picture added to the app and checking the user’s initials.
Since its launch in 2015, Android Pay has averaged 1.5 million new registrations each month in the U.S. and is accepted in over 2 million locations. However, user adoption for mobile payments has been fairly slow. For the quarter ending October 2015, 16% of users owning an iPhone 6/6s had tried Apple Pay (which was launched in September 2014) and only 5% have used it to pay at a POS terminal accepting Apple Pay. The primary reasons for low usage were 1) users not aware that a store accepts payments via Apple Pay; and 2) users simply not remembering to use Apple Pay. To increase usage, more widespread acceptance will be key. With its hands-free technology, Google is making mobile payments more convenient and could see a boost in adoption as a result. While Apple could follow suit and provide a similar option for Apple Pay, Google’s technology expertise in terms of location service via Google maps and fraud detection may provide a competitive edge in this space.
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