Google To Miss Out On Transaction Fees With Android Pay

Google IO 15 Keynote AH 13

The race to be the dominant force in mobile payments is heating up, with three big players in the mobile space promoting their own versions of mobile payments, allowing consumers to pay for goods and services at participating retailers much easier due to the fact that they won’t have to pull out their wallets and seek traditional forms of payment. Apple’s Apple Pay launched later in 2014, while Samsung’s Samsung Pay was announced officially earlier this year and is scheduled for a Fall launch in September. There is one more big competitor though, Google. They announced their long anticipated Android Pay mobile payment model last week at the annual developer conference, and already it seems like they may be at a somewhat disadvantage behind Apple Pay before their payment system is even out of the gate.

According to the Wall Street Journal, Google will not be earning transaction fees from payments made with their mobile payment platform despite attempting to work with banks to set up an agreement on a fair percentages, whereas Apple will gain a small piece of revenue (around 0.15%) from transaction fees obtained after payments as per an agreement between Apple and the banks/card issuers with which it’s partnering to offer the service to users. According to people who are familiar with the matter, this is due to policies which both Visa and MasterCard have in place which prohibits payment services from charging fees to their users, leaving Google with no way to gain any money off those transactions made.

While it seems that Google may not have gotten in on a deal which would have proven to be an easy cash cow, chances could be high that those banks which are already using Apple’s services may end up using Google’s no-fee service to try and push Apple into dropping or at the very least lowering their fee percentage gained from every single transaction made. This of course wouldn’t be an immediate action on the part of the banks due to three-year-long contracts with Apple of which roughly only a year has passed. That leaves Apple with quite some time left to collect fees. This is a small blow to Android Pay, but it could work out for the better if Google ends up gaining partnerships from more banks down the road.