Google and Apple Adjust Strategies on Mobile Payments

Google is set to unveil plans at its annual developer conference on Thursday for an overhaul of its mobile payment products, according to three people familiar with the situation, who asked not be named because the details are confidential.

Changes include a service called Android Pay that will let merchants accept credit card payments from inside their mobile apps and can be integrated with loyalty programs at retailers, the people said. Google Wallet, a mobile commerce app, will also be reintroduced as a peer-to-peer payments app that consumers can use to send money to each other directly from their debit accounts, they said.

Apple is preparing to announce details about enhancements to Apple Pay at its software conference next month. Those include a rewards program for the mobile wallet service, said two people briefed on the product.

The moves are the latest advances in mobile payments as several players jockey for an edge. With more consumers willing to make purchases using smartphones, companies are rushing to take the lead in the market, spurring eBay's PayPal to heavily market a suite of mobile apps, while startups like Square and Stripe expand their payments processing software to small- and medium-sized businesses.

The stakes are also high for Apple and Google, which are entering mobile payments later than others in the industry. For Apple, mobile payments tie people more directly to its main product, the iPhone. For Google, payments are a hook to reel people into its ecosystem of services and another way gain insight about consumers.

"They want to be as disruptive to payments as Amazon has been to retail," said Sucharita Mulpuru, a retail and payments analyst for Forrester Research. "By being early they can shape the customer experience and expectations."

Anaik Weid, a Google spokeswoman, declined to comment, as did Laura Newell, an Apple spokeswoman.

The challenge for Apple and Google, along with rivals, is that the mobile wallet is generally a technology in search of a problem. Cash and credit cards are easy to use and accepted broadly worldwide. As a result, the mobile wallet is typically more of a supplementary service than a replacement.

Nonetheless, mobile payments are growing quickly. Forrester Research predicts they will balloon to $142 billion by 2019 in the United States, almost tripling from $52 billion in 2014.

Awareness of mobile payments has been stoked by Apple Pay, which Apple introduced last October. Apple has partnerships with dozens of U.S. banks, allowing Apple Pay to work with most major credit cards. Some retailers, like Walgreens and Whole Foods, have said mobile wallet payments in their stores have grown significantly since the debut of Apple Pay.

But analysts have noted that a missing piece from Apple Pay was a rewards program to keep users returning to participating merchants. People familiar with Apple Pay said that next month, Apple will announce such a program offering perks to consumers who make purchases with the service, though they declined to reveal details.

Apple Pay remains limited. It is only available on the latest Apple mobile devices, and just a select number of retailers accept payments from the service, said Jan Dawson, an independent technology analyst for Jackdaw Research.

"Apple Pay has given it a really big shot in the arm, but even that is nascent," Dawson said. That leaves plenty of room for another company, like Google, to grab a slice of the market, he said.

Google's new Android Pay can also be used at brick-and-mortar stores in addition to letting merchants accept credit card payments from their mobile apps, said the people familiar with the company's plans. Consumers who use Android Pay for a purchase will also automatically add points to loyalty programs run by participating retailers, they said. The revamped Google Wallet will be available for Android and iOS devices, they added.

Google has had trouble getting a mobile wallet to catch on with consumers. In 2011, the company introduced Google Wallet, a way for customers to pay for purchases in stores with an Android phone. The project was riddled with problems; issuing banks and the large credit card networks were not on board, and mobile carriers hampered Google's efforts to support Google Wallet on Android phones.

With its revitalized payments push, Google now is working closely with credit card networks, card-issuing banks and payments processors, said the people familiar with the situation. Retailers, too, are more eager to accept mobile payments products that work with their loyalty programs in order to gain insight into customer shopping habits.

Google has the opportunity to offer its Android payment service to a broad swath of handsets by different manufacturers, while Apple's payment service is exclusive to its device owners. Yet Google will not be able to control its payment system as tightly as Apple, which could create room for the Android service to break down, Dawson said.

Another potential headache for Google is Samsung, the world's largest handset maker and the top seller of Android devices. The South Korean manufacturer acquired LoopPay, another mobile wallet competitor, this year. That offering could divide Samsung smartphone users who may have to choose between Google's wallet and Samsung's LoopPay product.

Still, Google and Apple offer something that few others can: Hardware, software and an insatiable desire to win.

"Google and Apple have deep pockets and the appetite to invest," said Mulpuru of Forrester Research. "They may create something that is a lasting disruption."

© 2015 New York Times News Service