V3 Enterprise Mobility Summit: Google's partnership with mobile payments specialist Softcard has created a more crowded contactless payment market in the US.
Apple Pay is already active in the country, and Samsung's acquisition of LoopPay indicates its ambitions to explore contactless payments, but there is no clear sign that one smartphone payment system will rule them all.
Jack Kent, director of mobile at analyst house IHS, told V3 that fragmentation in the contactless payment market is down to a lack of customer adoption.
"Softcard and Google were active in the US mobile payments space long before Apple launched Apple Pay late last year, but neither was able to gain significant user adoption," he said.
Kent explained that Apple Pay could benefit the whole contactless payment arena, despite the lack of mass US market adoption.
"Apple Pay will boost the payments market beyond just iOS devices. The increased user awareness will benefit Google and others looking to take advantage on Android," he said.
Google will not be alone in bolstering contactless payment options for Android platforms even with a partnership with Softcard.
This is evidenced by Samsung's acquisition of LoopPay, which offers Android users an alternative to the near-field communication (NFC) technology commonly found in smartphones.
Samsung could be seen as challenging Google on Android contactless payments, despite relying on Android for the foundation of its smartphones and tablets.
Kent believes that the contactless market is open to a host of firms using Android at the core of their service or hardware.
"Right now there is an opportunity to capture the Android payments market, and it could be the platform provider such as Google, operators or device makers such as Samsung," he said.
Kent added that Google's move to partner with AT&T Mobility, T-Mobile USA and Verizon Wireless is a way to extend its reach into the contactless payments market.
"Google's deal to get its mobile payments app preinstalled on US carriers' devices will be a significant boost to user acquisition," he said.
"Globally, Google is not in as strong a position as Apple because it doesn't have complete control of the hardware, so its US carrier partnerships will help."
However, Kent noted that Apple's control of its hardware and ecosystem gives it the edge over Google and Samsung.
"Apple's initial success is based on a number of factors, including its wealth of user credit card data already attached to iTunes accounts and the simple process through which users can integrate them into Apple Pay," he explained.
"The big challenge is in capturing users' card details. The challenge for companies like Samsung is that they may not have user card details, or have experience dealing/selling direct to consumers and have not built up user trust."
Money and marketing
Apple Pay and Google Wallet will need to offer a service that persuades people to pay with a phone rather than a contactless bank card or third-party e-retail app if they want to seize the contactless payments market.
Miya Knights, senior retail analyst at IDC, told V3 that mobile payments are carried out through traditional e-commerce apps, rather than NFC interaction, which will influence the direction of contactless payment development.
"It is likely that it will be apps that deliver the promise of mobile payments by interacting with smartphone and retailer payment hardware components," she said.
"For these reasons, retailers are likely to experiment by offering customers non-NFC, in-app mobile payment methods first."
Both services also run the risk of coming into conflict with PayPal, which reported that around $45bn of its net total payment volume for 2014 was from mobile payments.
Thomas Husson, principal analyst at Forrester, said that mobile wallets need to go beyond simply offering fast and secure mobile payment services.
"In the next three to five years, we expect mobile wallets to take off significantly, becoming a new marketing channel where marketers will mix their offline and online marketing efforts," he said.
"Instead of replacing merchants' own integrated apps, mobile wallets will complement them and offer more reach to engage beyond apps and loyal brand aficionados."
Husson explained that mobile wallets could be used to integrate reward schemes into the payment services, so that loyalty points, coupons, gift cards and promotions can be provided in one place.
It is still early days for mobile contactless payments in the US. But with Apple and Visa bringing Apple Pay to Europe, it is clear that major technology companies are not intimidated by the challenges that lie ahead.
For more insights on future mobility trends and technologies register for the V3 Enterprise Mobility Summit.
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