How is Google Planning to Monetize Its Android Pay Service?



Google will now rely on mobile advertisements and marketing programs to monetize its Android Pay service

In the previous part of this series, we discussed how Google (GOOGL) won’t charge any fees from banks for its newly released Android Pay service. We also discussed how this move will have an impact on Apple (AAPL) for its Apple Pay service. Despite not charging any fees for Android Pay, Google has other means to monetize the service.

According to a report from the Wall Street Journal citing payments industry analyst Richard Crone, a mobile payment user can bring in more than $300 per year in revenue for companies like Google. The main source of revenues would be through mobile advertisements and marketing programs such as discount coupons and loyalty and rewards program.

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Google is always looking to improve its mobile payments service

The main priority for Google now would be to attract more users to start using Android Pay. Its previous mobile payment service, Google Wallet, failed because users found it difficult to use compared to using a credit card. At one point, Google was may have been looking to acquire Softcard in order to improve its Google Wallet service. Softcard is a mobile payment company—a joint venture backed by telecommunications companies such as Verizon (VZ), AT&T (T), and T-Mobile (TMUS). We discussed this consideration in Google may acquire Softcard to upgrade Google Wallet.

The mobile payments market has huge growth potential. According to a report from eMarketer and as the chart above shows, mobile payment transactions in the United States have more than doubled in just a year—from $1.6 billion in 2013 to $3.5 billion in 2014. This is why Google has been taking initiatives to improve its mobile payments service.

For diversified exposure to Google, you can invest in the Technology Select Sector SPDR ETF (XLK). XLK invests about 3.63% of its holdings in Google.


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