Jack Kent, director of IHS Technology, offers his analysis of Google’s launch of Android Pay UK.
Based on our data on Android OS version and NFC support (which we understand is a requirement) we estimate that there should be around 25-million to 30-million Android Pay compatible smartphones active in the UK as of Q1 2016.
By supporting passcode and pattern support rather than just fingerprints as a means of verifying payments, Google has ensured that Android Pay will be able to work on the majority of UK Android smartphones, rather than the limited number of recent flagships that have fingerprint sensors. Google is also looking to actively promote in-app retail which will also be a key driver of Android Pay adoption.
In order to maximise its adoption by UK users, it is integral that Android Pay has a solid foundation of supporters upon launch of the service. These supporters include financial institutions, retailers, and payment platforms.
Regarding the retailers, Android Pay will be available everywhere that contactless payments are accepted, such as Costa, Starbucks, Waitrose, and Boots. Significantly, Android Pay will be compatible with Transport for London, allowing people to pay throughout London on the Tube, buses, and trains.
Public transport integration has historically been a major driver for adoption of mobile payment services.
In addition, Android Pay for in-app commerce payments will drive its adoption even higher with support already declared from JD sports, Zara, and Deliveroo apps.
This enables users to complete payments across a range of apps without having to register new cards and billing information.
The UK Android audience provides a strong opportunity for growth.
Given that Apple Pay is only available to iPhone users, the digital wallet market for Android is relatively clear for Android Pay’s entry. Samsung Pay, the main competitor but only for Samsung devices has not yet launched in the UK. Ensuring a widespread roll out of Android Pay helps Google maintain feature parity with iOS and therefore will give Android users less reason to switch platforms.
The UK is an advanced market when it comes to adoption for cards and contactless payments so there is a strong addressable market and infrastructure in place to support the Android Pay roll-out. Android smartphones currently make up 57% of the UK installed base.
Google aims to launch ahead of competition – but country specific deals mean a slow international roll out for mobile payments.
Although Android Pay doesn’t compete directly with Apple Pay, the market isn’t completely free of competition. In the Asian market, the leading rival on the Android operating system is Samsung Pay, thanks to its comparatively early launch in South Korea in 2015 and also in the US.
In China, Huawei is planning to cooperate with state-run bank-card processor China UnionPay in launching Huawei Pay. The lack of an official Google presence in China means, as with mobile content, this is a market in which it cannot compete. Apple is finding success there; it reported 3-million Apple Pay users in China in March 2016, in two weeks after the launch.
The expected UK launch of Android Pay, and the roll out of services in other countries, highlights one of the challenges in launching in-store and in-app mobile payment services; deals have to be struck locally with relevant financial and retail partners. As such, there is a risk that advanced payment features are only made available to users in the most mature or largest markets.