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  • Thierry Spanjaard

Google pursuits payments again

For years, technology major players, the GAFAM (Google Apple Facebook Amazon and Microsoft) have been trying to displace financial institutions when it comes to making payment transactions but in spite of huge investments, they have not succeeded yet to displace traditional financial institutions. The latest step in this fight is Google’s announcement for Google Pay relaunch.

The new Google Pay service, will let people pay using their phones and extend its focus to online banking, shopping and loyalty programs. It will include a new mobile-first bank account, called Plex, managed through the Google Pay app, in partnership with major US financial institutions including Citi, BBVA and the Stanford Federal Credit Union. Google announces its goal is to bring consumers a better “user experience” by making it easier for them to search through their past purchases. The app will also generate spending reports and give its users budget hints. At this time, financial transactions will be performed by the background banks while Google will provide its technology expertise.

As an initial step, Google Pay Plex environment target PayPal’s peer-to-peer (P2P) service Venmo and other P2P services. Google Pay also allows users to split and calculate expenses such as rent or a dinner via a group and includes a rewards program with chains such as Burger King, Etsy or Target.

Actually, being the #1 search engine worldwide, Google is already our main access to information. Android is present on more than 70% of smart phones worldwide making Google the most popular means for our communications with the rest of the world. Google home is another way for the tech giant to be at the core of all our interactions with different devices and information sources.

However, so far, attempts coming from the major web companies to enter the payment arena have not been extremely successful. We can only realize most payments around us are completed with cash or cards and that Google Pay, Apple Pay, Samsung Pay, Android Pay or their equivalents still play a minor role in the ocean of payments.

The payment community, made of the financial institutions, card manufacturers and issuers, POS terminals vendors, transaction aggregators and processors, and more globally all players in this field know that payment is essentially a low-margin industrial activity, where security is a key issue, standardization is essential and innovation is relatively slow to penetrate all market segments.

On the contrary, tech companies tend to evolve in a world where collecting information, especially personal data, is their core business and innovation is fast. In many cases, they have privileged innovation speed and time-to-market priorities over standardization and security.

Google in its new endeavor does no hide its ambitions: the company will collect more personal data thanks to payment transactions to “provide a better experience” to end users. We all know trust is the core value both in the payment world and for our concerns about personal data. So far, the Silicon Valley giants, especially Google, have poor records when it comes to privacy and personal data management. According to CNET, Caesar Sengupta, Google's vice president of payments, said the company won't share transaction history with third parties; he also said the data won't be shared with other parts of Google.

This latest Google Pay announcement is seen as a new step in Google’s plans to displace traditional financial institutions. FinTech Futures anticipates that, in 2021, Google will make a further move in the payment world by adding US partners BankMobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence and SEFCU and expanding its banking offer. In this new phase, Google will offer “digital checking and savings” and might even become the depositary of banking customers’ money in FDIC or NCUA-insured accounts.

The saga of the fight between the traditional payment industry and the technology companies is far from being over!

Photo credits: Jack Sparrow on Pexels - Jonas Leupe on Unsplash - Matthew Kwong on Unsplash

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