Android Pay is the new mobile payments app which requires the users to add debit or credit cards to the app so that they can make payments on the go. It is quite similar to Apple Pay and will work on all smartphones running on Android KitKat and above.
Apple unleashed Apple Pay last year and according to their 3 year deal with major financial institutions they would earn a half cent per debit card transaction and 0.15% cut for each credit card transaction.
According to the report by Wall Street Journal, new Android Pay service by Google won’t charge any transaction fees though it was not Google’s intention. The reason for this is because MasterCard Inc. and Visa Inc. which dominates the operation of payment networks adopted a new “tokenization” card security system that is transaction free which means that payment services cannot charge transaction fees to the issuers.
If Google is not charging the transaction fees it doesn’t mean that they cannot generate income from it. In fact, Insiders believe that Google can make more revenue by offering several offers and coupons to the customers.
Richard Crone who is payments industry consultant said that “Google plans to offer coupons, rewards and loyalty programs to consumers through Android Pay in partnership with issuers and retailers. If those initiatives succeed, they could generate more revenue than a cut of transaction fees.” He further added “An enrolled mobile-payments user is worth more than $300 a year to companies such as Google, mostly from advertising and other marketing programs.”
With the introduction of Android Pay, many banks are now considering to make the transactions without any charges. As Apple Pay is growing at a fast pace in the world, Apple has to re-plan their strategy around transaction fees because of the free service provided by Google’s Android Pay.