The Battle for Mobile Payments: Apple vs. Google

Mobile PhoneBattles between Google (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL) are nothing new, though we typically hear about them in the context of Google’s Android mobile platform competing against Apple’s iOS mobile platform.
That all changed when Apple announced Apple Pay in September. And it changed again with the shot Google fired at Apple on Monday.
Google’s latest acquisition gives it new hope in the battle for mobile payments, a move that consolidates the industry.
Though you’ve probably heard of Apple Pay, Apple wasn’t first to enter the mobile payments space – not even close.
Google first announced Google Wallet in May 2011 and released it in September 2011 with adoption at over 300,000 merchants. Apple Pay launched in October 2014 with adoption from around 220,000 merchants.
Though Google Wallet has been around for longer and started with more merchant locations, there seems to be no question that Apple Pay is the more mainstream mobile payments option.
Back in 2011, Verizon (NYSE: VZ), AT&T (NYSE: T) and T-Mobile (NYSE: TMUS) initially tried to block Google Wallet by refusing to allow it on its networks and creating a mobile payments company of their own to compete with Google. This company, a joint venture of the three service providers, later became known as Softcard.
Though Google ultimately found a workaround to get Google Wallet onto Verizon, AT&T and T-Mobile’s networks, neither mobile payments system was as seamless or popular as it was intended to be.

Altering the Landscape

This could all change very soon.
On Monday, Google announced that it was acquiring intellectual property and technology from Softcard. As part of the deal, Google also secured the right to operate on the Verizon, AT&T and T-Mobile networks. The companies also agreed to pre-install Google Wallet on all devices sold in the future.
Ending the conflict between Google Wallet and Softcard by bringing them together under one roof seems to me like a brilliant move on Google’s part. After all, they face stiff competition from Apple.
Tim Cook announced in January that Apple Pay was responsible for two-thirds of “contactless payments” on Visa (NYSE: V), MasterCard (NYSE: MA) and American Express (NYSE: AXP). This is incredible especially when you consider that Apple Pay had only been in use for four months when he made that statement.
Some suggest this latest move by Google may be too little, too late. They argue that Apple has already succeeded at taking mobile payments mainstream.
Indeed, it will be tough to beat Apple’s secure platform that doesn’t involve sharing financial data with third parties, conveniently uses fingerprint biometrics and is already widely adopted among merchants.
There may not be as many iOS devices as there are Android devices but iOS users are notorious for spending more money through their devices. Android doesn’t need to “win” in order to be an important force in the industry. It just needs existing Android users to start using it, something that is much more realistic after Monday’s announcement.

Ahead in Mobile Payments

I see this situation playing out similarly to how the mobile operating systems have played out.
Mobile payments are expected to grow by 60% in 2015 and the industry is certainly going to be big enough for multiple players the same way that there are multiple popular operating systems.
eBay’s PayPal (NASDAQ: EBAY) processed 78% of digital payments in 2014 and is also a driving force in the industry, especially with its new peer-to-peer payment platform Venmo. In the battle for mobile payments, Google and Apple can both win.
Google certainly has its work cut out it – Apply Pay seems to be a resounding success. But the acquisition of Softcard’s technology and the partnership with Verizon, AT&T and T-Mobile means it is still in the fight.
Game on.
DISCLOSURE: I personally own shares of Apple.

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