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Android Pay’s British debut raises stakes among competitors

As Android Pay journeys across the pond to British consumers’ smartphones, competitors such as Apple Pay and Samsung Pay will be forced to get creative in their efforts to entice users by providing utility, including rewards, offers and order-ahead options.

Yesterday, Google officially announced it is bringing its contactless payment service to Android smartphones in Britain within the next few months, beating rival Samsung Pay to the punch. The service will support Visa and MasterCard credit and debit cards from a slew of national banks and financial institutions, giving consumers additional mobile payment options while simultaneously raising the competitive stakes between big players in the space.

“The current three kings of ‘Pay’ (Apple, Android and Samsung) are going to continue to both confuse and excite every significant mobile payment market, which will drive early adopters that are loyal to their device/OS,” said Jon Squire, CEO and founder of CardFree. “For one to stand out, it is going to need to go beyond payments and provide true utility via loyalty, rewards, offers and order ahead.”

Bringing NFC to the UK
Android Pay, which is currently available in the United States, enables users to tap their smartphones on a terminal or reader to purchase items in-store. The payment is submitted through near field communication, or NFC, technology.

Consumers in Britain will now be able to access this service, provided they own an Android smartphone running the 4.4 or higher operating system. Individuals can complete payments with Android Pay at popular retail locations, such as Boots and Waitrose, as well as on the London Tube.

Allowing travelers to purchase mobile tickets at transportation hubs has been a top priority for many companies, due to the sheer convenience it offers consumers.

Android Pay will also be available for those making in-app purchases. It will eliminate the need for app users to enter their shipping and payment details during each transaction, a move that will likely drive more impulse buys.

Per Android’s official blog, Google is collaborating with a plethora of payment processors, platforms and technology providers in the U.S. and Britain to expand the number of places and apps in which Android Pay is accepted.

The mobile payment platform has been steadily gaining traction in the U.S., with 1.5 million new registrants signing up each month.

Some of Britain’s financial institutions supporting the Android Pay launch include HSBC, Bank of Scotland, First Direct and Halifax, among others.

MasterCard and Visa are the first two credit card companies partnering up with Android Pay for its British debut, placing them in a position to reach even more new consumers.

“We are aiming to capitalize on the contactless infrastructure that was laid out over the last 10 years in the UK for the benefit of mobile payments,” said Chris Kangas, European head of contactless and mobile device payments at MasterCard. “Like any new technology, it will take some time to grab hold but we anticipate this will become a dominant way to pay in the future.

“MasterCard is keen to advance payment technology to provide more consumer choice, and along with that, more convenience and enhanced security,” he said. “Android Pay provides an option for those who don’t have an iOS device yet would like the convenience of paying with their phone in shops and when riding the Tube.

“Tokenization is part of this story: the consumer’s card number is not exposed in the phone, instead an alternate number is used, which is a token. This provides an extra layer of security.”

Other credit card companies will likely be quick to hop on the bandwagon, particularly if they are seeking ways to become more involved in mobile commerce.

“Given Android’s large footprint and almost guaranteed percentage of the early adopters, it’s fair to assume the other card brands will join forces with all of the three kings,” CardFree’s Mr. Squire said. “At this point, no one wants to place a losing bet, so hedging across the dominant players versus going all in on one seems to be safest path.”

The loyalty aspect
In order to differentiate themselves as they gear up to entice the highest number of British users, the top mobile platforms will be forced to go beyond standard NFC-enabled payments by providing consumers with added value in their transactions.

With Samsung Pay set to arrive in Britain in several months as well, the space is set to grow even tighter and more competitive.

One key way to drive differentiation is to team up with widespread loyalty programs. Android Pay has already made some strides in this sense, as evidenced by its collaboration with the Plenti program, which lets members earn rewards points and redeem prizes through their smartphones at participating merchants.

Teaming up with fast-food chains and other food marketers is another surefire way of driving adoption. If consumers can use Android Pay to purchase meals and order ahead on their mobile devices, they may be much more likely to engage in impulse buys and venture out for an impromptu snack.

As it prepares for its national rollout in Britain, Apple Pay should focus on collecting as many big-name partners as possible, so as to fend off competition before Samsung Pay joins the fray.

“The UK has seen tremendous growth in contactless payments in the past year, powering close to one in every 10 transactions,” Mr. Squire said. “Android Pay should only buoy those numbers and increase consumer utilization – especially with over 52 percent of the population leveraging its OS.”