Payment Revolution: How Apple and Android Are Changing How We Pay for Products Today

‘Paying for things’ is a huge business. Everyday, we spend $12 billion in the U.S. in over 200 million payment transactions, and we use our debit or credit cards for a most of that. Essentially, those cards are just little pieces of plastic with exposed numbers and a magnetic stripe interface that is vulnerable to skimmers. It’s so easy for them to be compromised, it’s no wonder people have been dreaming about replacing plastic cards for years.

Fortunately, the way we pay for things is changing–smartphones and wearables are redefining the way we pay for things. More and more, we’re seeing people pay for items in the real world with their mobile devices.

Your smartphone or smartwatch can be your ticket to a more streamlined shopping experience. In this article, I’ll outline two popular mobile payment solutions: Apple Pay and Android Pay by Google.

How They Work

If you put the two systems next to each other, you’ll notice they basically do the same thing, and even their user interfaces are similar. For both systems, users have the ability to add their debit and credit cards directly into the app by either taking a picture of the card or entering the information manually. Both Apple Pay and Android Pay utilize NFC (near field communication) technology to communicate transactions to NFC-enabled payment terminals. Paying using either technology is really simple; you don’t even need to open the app, instead you can just hold it to the terminal to pay.

Apple Pay and Android Pay work with NFC contactless payment terminals. You don’t need a WiFi or cellular connection on your device to complete a payment. Image credit: Google

While Apple Pay and Android Pay are mostly used to pay for items in the real world, many iOS and Android apps also support payment using these services.

Apple Pay and Android Pay allow simpler checkout in apps. For example, you can choose Apple Pay as a default payment option in the Uber app for iOS.

Apple Pay and Android Pay can also be used as payment methods on websites. The next time you make a purchase on the web using your iPhone/Android, check the payment methods and, if you see Apple Pay/Android Pay logo, you can pay in one click without having to create an account or fill out lengthy forms.

Services like Groupon eliminate the need to use credit or debit cards to purchase something.

Which Devices Support Them?

Which payment system you use will be down to which phone you have. Apple Pay is supported on Apple’s devices starting from iPhone 6 and up. Each transaction should be authenticated by using Touch ID or Face ID.

On the Android side, there are way more compatible phones. Pretty much every device running Android 4.4 KitKat with a NFC chip built in can support Android Pay. According to The Verge, Android Pay was already compatible with 70% of Android devices when it was released.

How Secure Are The Technologies?

As with so many new technologies today, the biggest worry about something like Apple Pay or Android Pay is security. We live in an age where security leaks are publicly reported almost all the time.

However, for both payment systems, security concerns are becoming less of an issue. Here are a few facts that show you don’t have to worry too much about security when using them:

• Real credit card details are never stored on a device. Both Apple Pay and Android Pay don’t emulate the signal used when you make a contactless payment with your debit or credit card. Instead, they create a virtual card that’s used to make payments. If you loose your Android or iPhone there’s no need to cancel your credit card because it’s not stored on that device.
• Credit card details are never shared during a payment transaction. Both Apple Pay and Android Pay leverage tokenization–each transaction is processed via individual random account numbers, rather than an actual credit or debit card account number. This means during payment transactions the merchant never sees real credit card numbers. In case that somebody intercepts the NFC signal, no valuable information can be stolen.

• Both systems are able to use fingerprint scanners as an extra level of security (in fact, authentication with Touch ID or Face ID is mandatory for Apple Pay).

Touch ID on an Apple iPhone

• Finally, payments are only sent out if your phone is working and unlocked. If it is locked and not in use, your account should be safe.

Which Banks Support Them?

All major American banks like American Express, Bank of America, Wells Fargo, BBVA Compass, Capital One, Chase, and Citi support both payment systems. You can see a full list of banks supporting Apple Pay in the US here. Check out this page to see a list of banks that support Android Pay.

Some banks (like Bank of America or Wells Fargo) go even further in supporting payment systems. They’ve installed NFC-enabled ATMs around the U.S., which allow you to access your bank account to withdraw cash using your phone.

Apple Pay and Android Pay now support card-free ATM transactions at Bank of America. Image credit: WhatWhatTech

Which Shops Accept Them?

Currently, Apple Pay is supported by 35% of retailers in the U.S. in more than 4 million locations. According to Jennifer Bailey, the head of Apple Pay, Apple expects that two thirds of the top 100 retailers will support Apple Pay this upcoming year.

As a user, you can check the point-of-sale device for the Apple Pay or Android Pay logo, or another symbol that indicates if contactless payments are accepted.

This symbol means contactless payments are accepted by the device.

How Many People Use It?

According to a report by Juniper Research, the number of Apple Pay and Android Pay users will be 86 and 24 million by the end of the year, respectively. While Juniper expects Apple to dominate the contactless payment market over the next four years, it’s clear that Android Pay is also seeing big increases in usage. Taking the number of devices into account, it could surpass Apple Pay usage within a few years.

Image credits: Juniper Research

Although both platforms have grown since their launch dates, the percentage of users who use Apple Pay or Android Pay is still pretty low. According to Crone Consulting, only 4% of Apple’s users with Apple Pay-enabled iPhones use the service. As for Android Pay, a paltry 1% of users with compatible devices use the service.

The Problem with Mobile Payments

Mobile payments have a few technical issues that will hopefully be solved in the near future:

• Bank support. While the total number of banks supported by the payment systems is impressive, not all banks are supported and you may find your own bank is missing from the list.
• Merchant support. Considering both Android Pay and Apple Pay are still relatively new, not all places actually use these technologies. While users may get a new phone every two years or so, merchants don’t replace their POS infrastructure nearly as often. The main problem mobile payment systems face in the U.S. and elsewhere is limited support for NFC payments.
• Unnecessary actions during payment. Some point-of-sale terminals ask for a PIN or for a signature, even after the ‘done’ chime has sounded. While PINs may be considered a ‘security’ precaution, a signature doesn’t make sense. You can sign anything and it doesn’t matter. This negates one of the best features of Apple Pay and Android Pay: speed.

Mobile payment brings up another problem that doesn’t have much to do with technology–spendaholics love it. Less friction during the process of payment makes it much easier to spend extra money.

Conclusion

It’s clear that mobile payments are taking us one step closer to a wallet-free future. Both Apple Pay and Android Pay are great examples of hardware and software working in tandem. But no matter which service you choose, don’t recycle your old-fashioned leather wallet just yet. The mobile payments revolution is just getting started, and it’ll take some time before most merchants are ready to support mobile payment technology.