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At BCS Consulting, we are focused on delivering complex business change projects in banking and the financial markets that exceed client objectives and deliver impressive results.

At BCS Consulting, we use our deep domain knowledge and experience to help clients define and deliver large scale business and technology change initiatives.

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At BCS Consulting, we like to share our informed thoughts and opinions on the latest developments in the financial services marketplace.

    Android Pay – Finally

    Hitesh Parmar
    Hitesh Parmar

    • Finally, after months of speculation and anticipation, many Android users in the UK will now have a dedicated contactless payment service that can rival Apple Pay. Although there have been similar apps for Android users, there has not been a dedicated Operating System app that makes use of Near Field Communication (NFC) technology for payments. Apple Pay has had a head start for over a year now, with many banks quickly signing up to their service and using it as a means to entice customers, who have duly followed in large numbers. This has been one of the factors in creating a contactless payment market which topped £1 billion in 2015.

    First Direct, Halifax, HSBC, Lloyds Bank, M&S Bank, MBNA and Nationwide Building Society are the first group of banks that have signed up to Android Pay, which is due to be released in the next few months.

    It is interesting that, similar to when Apple Pay was launched, Barclays haven’t signed up as they will be eager to push their own contactless payment applications. As the market grows and users adopt either Apple or Android Pay, I suspect Barclays, and others like them, won’t be able to hold out for much longer. Despite leading the way in payments technology with the hallmark Ping It app, now that Apple and Google have brought their toys to the playground, it will prove a tough ask for Barclays to compete. The insistence on pushing proprietary products and the resistance to adopt recognised payment methods could both push existing customers away and prevent new customers from switching.

    How does Android Pay work?

    Similar to Apple Pay, when making a payment Android Pay will create a unique transaction token that doesn’t contain your debit or credit card details, therefore offering a layer of protection. The service will then debit your account where necessary. Before making a payment, Android Pay is likely to make use of fingerprint recognition on new phones, or a pin on older models. This will offer the customer assurance that the technology is secure, as well as the opportunity to allay the security concerns some have with contactless cards. If successfully deployed and accepted by most, if not all, banks and retailers, there is a good chance that we will see a slowdown in use of physical cards as more consumers switch to the likes of Apple and Android Pay.

    So what will this introduction mean to the market?

    This move from Android, if implemented effectively, could have a sizeable impact on the payments market; however we shouldn’t be surprised as it’s something that banks and the industry have seen coming for a while. With the USA leading the charge as early adopters of both applications, it was only a matter of time before the UK will feel the impact of the juggernauts of the technology industry muscling into the banking world.

    1. The growing rise of contactless payments:

    • Those with an Android phone harnessing NFC technology (around 60% of the market) will be able to take advantage of mobile contactless payments. Add to this number those already using Apple Pay, who are currently signing up 1m new customers a week, and we will surely see a spike in contactless payments.
    • This will cause a further reduction in both cash and card related transactions as mobile payment technology becomes more readily available for customers to use for both physical transactions and online through the device itself.

    2. Consolidation of technology in banking:

    • Banks could see this move as an opportunity to spend less on making large, customer oriented technology changes and instead make use of the huge amounts being spent by specialist technology providers. They can focus on offering customer centric services that leverage Android or Apple branded applications.
    • Some customers may switch to providers that offer recognised mobile payments. I don’t see this being a major factor in switching but some may feel the need to be offered the “best in the market” technology and more convenient ways of banking. On the flip side, with Apple or Android Pay, users will not be tied down to their bank, phone manufacturer or network providers who offer a similar payment service.
    • Samsung Pay, Ping It, EE Tap and Vodafone Wallet will no doubt take a hit and lose a hefty chunk of their customers.

    3. Google will harness the data:

    • The biggest impact in my opinion is that Google will now have our spending data to add to its collection. The use of customer data is clearly referenced within Google’s Terms of Service, and I believe it could range from a high level view of how customers use the application to much more detailed analysis of customer spending habits to develop insights that could be leveraged with partnering retailers. I am also keen to see if this is used by Google as a platform launch wider banking offerings.

    I will be an adopter of the service and have been keen to take advantage for some time now, given I’ve been sitting on NFC technology for years without much use! Time will tell if Android Pay becomes my most used app on my phone…

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