Google and Apple to Struggle with Payment Services

MPP Global Posted by MPP Global on Tuesday, 15 March 2011

With the launch of new payment services recently by Apple and Google, the subject of PayPal’s dominance has come under question. However, there will be a few lessons to learn before they can seriously mount a challenge to the market leader.

For payment services to be wholly effective there is more to question than merely the highest uptake. For end service users, such as Google and Apple who own relationships with consumers, to move into effective eCommerce payment service handling they need to move beyond their traditional areas of advertising and applications to be truly a background application.

The key to success within the payment services market for digital products can be seen as breadth of payment choice combined with multiplatform coverage, to which neither company seem to be ready to tackle. The handling of multiple payment types forms the basis of a dexterous payment platform. Focussing solely on credit card payments does not offer the type of universal payment service which businesses require. Bank payments and direct debits, as well as mobile billing capability, are must have payment options for digital goods, especially outside of markets dominated by credit and debit cards. According to Datamonitor, 55% of consumers in Germany and 35% of consumers in Holland, for example, pay for online goods with alternative payment types to credit or debit card.

Supporting alternative payment types like Direct Debit is fraught with issues which require complex business processes to combat. With no standard verification process present and times ranging from 3 days to 3 weeks for payment confirmation from the bank, robust business procedures and software ‘rules’ are required. Offering instant payments online, on mobile or via connected-TV requires a problematic process of short term credit and new issues such as debt collection, which become vital to success.

Furthermore it remains to be seen whether the new services will encapsulate multiple payment methods such as pre and post-pay micropayments and subscriptions across the full range of payment channels such as web, mobile, and TV. To truly establish themselves as market leaders in this area, both companies will need to demonstrate their flexibility and breadth of options across all three key payment criteria of payment methods, types and channels, which is an area to which even PayPal has not adequately demonstrated to date.

Paul Johnson, CEO at MPP Global; the UK’s leading provider of Payment Services and eCommerce Solutions, said: “The provision of core payment services is a complex arena for Google and Apple to move into.

Whilst they might excel in the arenas to which they are accustomed, the key to success in the payment services milieu is offering a broad range of payment types, payment methods across various payment channels.”

Developing a complex series of relationships with small sellers and creating true bi-directional flow of funds takes time to master. Apple’s proposition of leveraging losses by charging 30% will not hold water for offline payments and tangible goods and is clearly an area which requires serious development for either of the companies to be successful.

Paul added: “Success with unilateral payments requires robust bespoke systems, a breadth of integration and experience in the area. Google and Apple’s new offerings may be seen as a major development in the payment services industry but it might be a case of another major company taking a step away from their core market and I cannot see how they will succeed in the core payment market without serious diversification.”

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