By Dimitra Stefanidou
Millions of consumers around the globe are choosing speed and convenience by paying for purchases with their mobile phones. Recent data predicts, “mobile purchases will be worth a total of $720 billion in transactions by 2017 — up from about $235 billion in 2014”.
And that figure should just keep growing, an expected $1 trillion by 2019. The main competitors in the field, such as Apple Pay, Samsung Pay and Android Pay, use near field communication (NFC) technology. This allows a customer to pay a retailer by briefly holding their smartphone to a payment terminal.
Each application has advantages compared to the others. For example, Apple Pay is at the supported by thousands of locations around the globe, including in Britain, Singapore, China and Australia. Meanwhile Samsung Pay enjoys good US penetration with broad acceptance by retailers such as Walgreens, Walmart, Best Buy, Target and others, that’s 90% of the top 250 retailers globally. Android Pay, however, is compatible with more devices than the other two applications.
Transactions made through Apple Pay were worth $10.9 billion last year, with most of them in the U.S., Samsung Pay, which was launched a year ago, dealt with $847 million in the South Korea. Google hasn’t announced any transaction volumes for its Android facility.
Similarities and differences
In order to make payments more secure, all three applications use tokenization. Every transaction has a unique secure dynamic code which is transmitted when the payment begins. As this token is unique for every device it makes it difficult for a criminal to divert this data for unauthorised transactions.
Tokenization means users do not have to give their actual account number; it is replaced in the processing by a randomly generated number. The hardware component that makes this possible, or “secure element”, is a chip placed within the smart phone to prevent hardware or software attacks to the device. Both Apple and Samsung Pay use this method.
However, Android Pay differs from the other two as it uses a unique form of NFC technology, Host Card Emulation (HCE). The user enters his credit card onto the app and when he wants to pay he has to keep the mobile phone, which is used as a virtual wallet, close to the terminal and insert a pin or scan a fingerprint. It also has offers Magnetic Secure Transmission (MST) which can be accepted by older terminals which do not support NFC technology.
“Samsung Pay and Android Pay have achieved a comparable market position – on a par with Apple Pay’s position the first six months after launch,” says Phoenix Marketing International in a report published after a survey of 3,003 credit card holders in March 2016. According to their data, 32% of smartphone users, that also own a credit or debit card, have started using one of the applications.
As Leon Majors, Senior Vice President of Phoenix noted, “If we look at adoption alone (excluding usage), the approximately 23 million Millennial and Generation X third-party wallet adopters taken together point to the next big thing” and also that “Right now, it’s not much about winning the brand race as it is giving these ‘apped up’ consumers more places to shop.”
Innovations and technology
The Bank of America now offers around 2,800 NFC-enabled automated tellers across the US, and plans add about 5,200 more by the end of the year. Users of Apple Pay and Android Pay that have connected their debit cards with the applications can use the system to conveniently withdraw money without their payment cards.
Looking to the barriers for this kind of technology, it is worth noting that not all smartphones support NFC technology. This means that many mobile phone users cannot use their mobile phones to make payments.
In addition, some devices do have NFC but the payment app is not supported. For example, Samsung Galaxy 5 does have NFC but it is not supported by Samsung Pay. Finally, retailers need to invest in the newest technology and work with financial institutions to provide the infrastructure needed for NFC payments.
Annete Jump, research director at Gartner notes,”Any mobile payment wallets that are tied to the device will have limited adoption, “cloud-based solutions will have a better chance to succeed as they can reach a wider audience and can support many use cases beyond face-to-face or in-store options. ”
The report by Phoenix says that Apple Pay continues to be the number one choice of consumers. In the past year, 74% of Apple Pay users have added multiple cards to the application and 64% of them intend to add more, raising the adoption rate of Apple Pay in the US by 18% in the last year. And this popularity is across the board, with everyone from 39% of millenials to all of the older persons surveyed.