Google is unable to levy transaction fees on banks and other card issuers who support Android Pay, thanks to recent standardisation of Visa and MasterCard’s tokenisation services, said The Wall Street Journal.
And the card issuers hope Google’s no-fee approach will pressure Apple to reduce or eliminate the fees for its Apple Pay service.
Initially banks and other card issues rushed to work with Apple Pay, agreeing to give it 0.15 per cent of the value of each credit card transaction. Apple also collects 0.5 cents on each debit card purchase.
But Google will receive no such fees from card issuers because Visa and MasterCard recently standardised their tokenisation schemes and made them free, which effectively prevents payment services from charging a fee to issuers. Visa’s initiative is called its Digital Enablement Programme (VDEP), which was unveiled on the same day (28 May) as Google’s most recent announcement of Android Pay.
“There is one agreement with Visa and the banks can have confidence that there are no pass-through fees,” said Visa president Ryan McInerney.
Even with the elimination of fees, it is still possible for Google and other payment services to charge banks for other services, such as marketing arrangements. Also, Android Pay is likely to grow faster among card issuers without fees. And, for Google, the real benefit from Android Pay is from the advertising data that will be generated through coupons, rewards and loyalty schemes associated with payments.
Some banks will attempt to use the Google no-fee arrangement to force a reduction in the fees for Apple Pay. Currently, Apple is only available in the US. But as it expands internationally, it may have to negotiate new terms, giving the opportunity for banks to push for a lower fee.