Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google has always had a branding problem with its multiple mobile payment services (much like its branding problem with messaging apps). The search giant announced this morning that it is planning on unifying both of its payment services -- Google Wallet and Android Pay -- under one new rebranded service: Google Pay.
It's about time.
Continue Reading Below
Sixth time's the charm?
It's never been clear why Google felt it was necessary to have separate services to purchase digital content on Google Play, auto-fill credit card information in its popular Chrome browser, process peer-to-peer (P2P) payments, and support contactless payment terminals at retail stores.
The good news is that the company is finally recognizing the error of its ways and moving to consolidate everything under Google Pay. After factoring in the long dead Google Checkout, the newer Pay With Google version, and the recently announced Google Tez (Google's localized payment service for the Indian market), Google Pay represents Google's sixth payment service.
Google is not only finding a more coherent branding strategy, but also essentially aligning with Apple's (NASDAQ: AAPL) branding. Many companies have borrowed the Mac maker's simplified branding (Samsung Pay and Fitbit Pay, to name a couple), so Google's move should come as little surprise. Apple Pay adoption continues to make progress, with active users more than doubling over the past year and annual transactions soaring 330%, according to CFO Luca Maestri on the November earnings call.
There's still plenty of work to do before consumers ditch plastic (if ever), so it's important that Google consolidates its payments services now while the mobile payments market is still in the early innings. Eliminating any confusion over which service an Android/Google user needs will only help adoption.
Show me the money
When Android Pay first launched in 2015, The Wall Street Journal reported that unlike Apple, Google would not be earning a cut of the transaction fees. The Mac maker reportedly keeps a 0.15% cut of all transactions proceed through Apple Pay, justified in part by added security through tokenization (Android Pay also uses tokenization), a seamless user interface that encourages usage, and Apple's marketing prowess and sheer weight in consumer markets.
What's less clear is whether or not Google Pay will have a better economic model. Google Wallet hemorrhaged cash in the early days, mostly in the form of exorbitant processing fees paid to credit card companies, contributing to its financial failure. Hopefully, Google has secured more favorable terms from financial partners, so that Google Pay can succeed where all of its predecessors have failed.
10 stocks we like better than Alphabet (C shares)When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Alphabet (C shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of January 2, 2018
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and FIT. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.