Apple Pay vs. Google Pay: How They Work

Both mobile payment systems are free to consumers and similar in other ways

Apple (AAPL) and Google (GOOG) brands inspire almost religious devotion in their loyal consumers, who see comparisons between the two tech giants as a comparison between apples and oranges. When it comes to Apple Pay and Google Pay, our findings suggest they are largely identical offerings. Apple Pay seems easier to use, while Google Pay has a few more features.

Key Takeaways

  • Apple Pay and Google Pay are both widely accepted mobile payment systems.
  • Apple Pay and Google Pay are largely identical offerings. Apple may be to be easier to use, but Google has more features.
  • Google acts as an intermediary and stores your card details on its servers, while Apple has explicitly declared that it will never track your transactions.

Apple Pay vs. Google Pay

  • Apple Pay and Google Pay are mobile payment systems.
  • Apple Pay was introduced in 2014. Google Pay was introduced in 2018, replacing Google Wallet, which made its debut in 2011.
  • Both systems allow for contactless payment using near-field communication (NFC) technology, though their implementations are slightly different. Apple, with complete control over its hardware, makes Apple Pay available on iPhone models with Face ID and Touch ID (except the 5s), iPad models with Touch ID or Face ID, Apple Watch Series 1 and later, and Mac models with Touch ID.
  • Google, on the other hand, opts for a more traditional PIN-based authentication system. This allows it to work on older hardware.
  • Both Google Pay and Apple Pay can make online purchases straight from an app or website, automatically handling the entire checkout process with pre-filled defaults and only requiring PIN or Touch ID verification to complete the transaction.
  • From an industry point of view, the most significant breakthrough that mobile payment systems offer is in their security, and here Apple and Google both incorporate some pretty nifty tricks.

Security Systems

Credit card fraud remains a significant problem worldwide. As banks and retailers work to upgrade their platforms, mobile payment systems like Apple Pay and Google Pay may allow the U.S. to leapfrog to the forefront of payment security.

Though the two systems appear to be equally robust, the companies take different approaches that shape what their products can and cannot do. For the consumer, the use of Touch ID versus PIN authentication is the most visible difference, but behind the scenes, there is a lot more happening. Most important is the fact that neither system reveals the user's card details to the vendor.

Google security

With both systems, the user's card details are provided only once, during the initial setup. Google adopts an intermediary role and saves your card details on its servers. It then issues a virtual card to your device, the Google Pay Virtual Card. When paying, the device only transmits this virtual card's information. The vendor never sees your real card, which is protected by Google's secure servers. When the seller charges the virtual card, Google, in turn, charges your stored debit or credit card and is the only entity that ever sees your real card through this transaction.

Apple security

Apple employs a different system known as tokenization. Here, when your card details are provided to the device, it contacts the issuing bank directly and upon confirmation receives a device- and card-specific token called the Device Account Number (DAN), which is stored on a secure chip on the device. The DAN structurally resembles a credit card number and is passed on to the merchant when any payment is made before getting authorized by the bank.

Pros and Cons

These seemingly small distinctions point to the key differences between the two services. Because Google acts as an intermediary and stores your card details on its servers, it does not need to worry about making any deals with the banks, and you can add practically any card to your Google Pay. You can even add loyalty cards and gift cards to your account and send and receive money that you can store in the account and use directly without involving your bank.

In every single way, Google Pay tries to replicate a real wallet in the virtual world. Google tracks your transactions, saving order details as if you stuffed the receipt into an actual physical wallet. This data will be used, as with all data on Google, to serve you ads, which feeds directly into Google's business model. Google Pay does say that it won't sell your transaction history to third parties "or share it with the rest of Google for targeting ads." In keeping with its role as an intermediary, Google promises 100% security with its Google Pay Fraud Protection policy.

Apple, on the other hand, explicitly declares that it will never track your transactions. Apple won't even store your card details on its servers or your devices. All Apple does is transmit your card to the bank, authenticate it with the bank, and receive and store the DAN that the bank sends back.

Apple is not a payment intermediary and is instead positioning itself as a payment medium alone. In essence, an Apple Pay-enabled phone becomes an expensive and beautifully crafted credit card, one that can be lost or become useless if the phone battery dies.

Though fingerprint scan security and the ability to remotely disable the phone offer quite a bit of protection, if someone does get access to your Apply Pay phone, you have to take up the issue with your bank and not Apple.

This approach also means Apple must negotiate deals with banks and get them to sign up for its service, a task that has limited the number of cards that can be used with Apple Pay. Not tracking transactions gives Apple no way to monetize the user, and therefore, it charges a per-transaction fee to the banks that it partners with, though the details of this fee structure remain somewhat murky.

Other Considerations

You might wonder why banks would pay a per-transaction fee to Apple when Google's approach costs them nothing. Perhaps Apple has managed to convince them that its users will shop more with Apple Pay, or banks believe they gain an exclusivity advantage over banks that have not partnered with Apple. Or maybe Apple does a better job of coordinating the different stakeholders involved in such a complex and intricate network.

When Apple Pay and Google Pay first came out, there were several major retailers that refused to accept them. A consortium of vendors known as the Merchant Customer Exchange (MCX), which included Rite Aid (RAD), CVS (CVS), and Walmart (WMT), tried to set up a competing alternative called CurrentC, which ultimately failed. Today Rite Aid and CVS both accept Apple Pay and Google Pay. Walmart remains a holdout, instead offering its own system called Walmart Pay, which functions similarly to Google Pay. (Some Walmart customers claim to have found workarounds using other shopping apps, which they describe on a number of online message boards.)

Does Apple Pay Charge Fees?

No, Apple Pay does not charge consumers fees. Instead, it makes money directly from the bank that issued the card linked to the Apple Pay account.

Does Google Pay Charge Fees?

No, Google Pay does not charge consumers fees. Google makes money by charging vendors a percentage of each transaction, as well as through targeted ads.

Does Apple Pay Offer a Credit Line?

Apple Pay doesn't have its own credit line but pairs with the Apple Credit Card.

Does Google Pay Offer a Credit Line?

No, Google Pay does not currently offer a credit line in the U.S.

The Bottom Line

Apple Pay was once promoted as "Your wallet. Without the wallet," a description that, in truth, fits Google Pay better. Google Pay, meanwhile, was promoted as "an easier way to pay," which in all fairness is what Apple ought to be saying. For the consumer, both systems offer convenience and a measure of security, so choosing between the two is mostly a matter of personal preference.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
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  2. Google. "Secure Your Google Pay Account."

  3. Google. "Use Virtual Card Numbers With Autofill."

  4. Apple. "Apple Pay Security and Privacy Overview."

  5. Google. "Check Your Transaction History."

  6. Google Pay. "How Google Pay Helps Keep Your Data Private."

  7. Google. "Keep Your Payment Info Safe."

  8. Walmart. "Walmart Pay."

  9. Apple. "Does It Cost Extra To Use Apple Pay?"

  10. Google. "Benefits."

  11. Apple. "Apply Now."

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