Mark Robert Glover

Mark Robert Glover                                    
Senior Research Analyst, IDC Financial Insights
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8 months after its entry into the US market, Android Pay is now on offer in the UK. Its competitor Apple Pay has been in the UK for about a year and is supported by almost all the major banks. That said, its customer uptake has not been particularly impressive: while 10% of payments is contactless, fewer than 1% are made with a mobile phone. In the USA, although its uptake had been slow and uneven, it has begun to make traction. Although ubiquitous mobile payments may appear to be a long way off in the UK, it may be too early to say. For example, contactless cards were first launched in the UK in 2008 and were also slow to take off. The decision of Transport for London, Europe’s biggest single retailer, to allow the use of contactless debit and credit cards on buses and the Tube, was the tipping point.

Google chose the UK as its next market to disseminate Android Pay because of the country’s familiarity with contactless payments. However, most contactless payments are made in London and its environs, where people seem comfortable with them perhaps simply because of the widespread use of the contactless Oyster Card for the payment of public transport.

Both Android Pay and Apple Pay can theoretically be used in all those retail outlets in the UK where contactless is already accepted, including the Tube. There is no new back-end technology the retailer needs to have installed, it is simply a question of writing a contract. Android Pay appears to be showing a little more emphasis on internet payments than its competitor, perhaps because of its history – having released a digital wallet (Google Wallet) in the USA in 2011, although it didn’t gain much traction.

As in the USA, banks are also joining the fray. They give in-store shoppers a way to pay with their phones that is powered by a financial institution they trust. This development means that shoppers will have more choices for mobile payments as the idea of paying in stores with phones becomes more popular. It also means that Android Pay and Apple Pay could both lose out on attracting users who are not early adopters of technology and trust their bank’s app for payments more than one made by a big tech company.

Barclays Bank has already decided not to support Android Pay because of its plans to make contactless payments available through its own proprietary mobile banking app. Android Pay is only supported by six of the UK’s major banks: Lloyds Bank, HSBC, MBNA, the Bank of Scotland, Nationwide and First Direct; and while Apple Pay supports American Express, Android Pay does not.

Android Pay does, however, have something on its side – the fact that nearly 60% of the UK’s smartphone owners use an Android set, and can therefore use the new means of payment immediately providing they’re fitted with an NFC chip and are Android KitKat 4.4 or newer. That green-lights a whole host of handsets, including budget phones. In comparison, you need an iPhone 6 or SE to use Apple Pay – so some interested parties will need a new handset. This might turn out to be a barrier to its widespread use here and could work in Android Pay’s favour.

To add to the competition, the leading maker of Android phones is launching its own payments service. Samsung Pay arrives in the UK “later this year” and, according to a spokesperson from Samsung, will offer a uniquely simple solution combined with special offers for users.

Both Android Pay and Apple Pay use the same basic technology, similar security and share similar objectives. They are simply the wireless payment systems for their respective platforms. That said, Android Pay has an edge over its competitor because of its more inclusive stance: even pretty old phones will be able to use Android Pay, while only the very latest iPhones can make use of Apple Pay. And Apple Pay has the edge in the UK at least because it is supported by almost all the major banks, something which Apple Pay users don’t have to worry about.

Although it’s a little too early to quantify the success of the various mobile payment apps in the UK, Apple Pay seems to have the edge in the USA, and as UK customers are becoming more accustomed to this method of payment, Apple Pay might be able to capitalise on its support from the banks and its widespread acceptance network to take the lead here.

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