Visa Inc and Mastercard Inc have made their "tokenization" card-security service free, which prevents payments services from charging fees to issuers. Some banks are not happy about sharing fees and could try to use Google's arrangement to effect changes in Apple's deals.

Ramping up its challenge to Apple in mobile payments, Google unveiled its pay-with-a-phone system for Android devices which will generate a one-time 'token' or virtual account number so the actual credit card data is not revealed in a transaction.

Android Pay, unveiled at the Google developers conference in San Francisco, brings together mobile carriers, payment networks, banks and retailers to allow smartphone users to use their handsets instead of payment cards.

Android Pay would work in more than 700,000 US retail outlets that accept contactless payments. Similar to the Apple Pay system unveiled last year, it will allow consumers to store credit card information on their handsets along with loyalty cards and other data.