Is Google Pay (with Plex) Going To Take Over the World?
By: Frank Li
Tags: Future, Google, Economy, Payments, Innovation

Is Google Pay (with Plex) Going To Take Over the World?

Let me know if you disagree

Photo by Mitchell Luo on Unsplash

Google recently updated and redesigned Google Pay. In addition to the ability to make payments, you can now use Google Pay to manage your personal finance and via Plex, have a digital bank account linked to a bank.

In a world where there are too many digital wallets and digital banking capabilities, it is easy to dismiss this new development as another app in the crowded market space.

However, dismissing Google Pay will be a mistake.

Google Provides Traditional Banks Access to Mobile Customers

Firstly, just at a fundamental level, the creation of Google Pay (with Plex) would directly affect the banking industry, and level the playing field.

Many traditional banks have had difficulties in implementing digital or mobile banking strategies, as the cost of digitizing banking operations can be expensive. What Plex does is that it allows these banks to have a mobile strategy without incurring a lot of the overheads. Banks have now access to a mobile platform and offer better terms, products, and interest rates without creating and maintaining a separate banking application. For banks, this means that the competition just got tougher. It may make certain offerings of digital banks completely redundant.

Google’s Offerings Are Clearly Targeted at Financial Data And It Has Multiple Highly Lucrative Monetisation Options

One can speculate, given Google’s usual business model, that Google Plex — will by providing the user interface (UI) layer and acting as a conduit for these bank accounts — be collecting user’s financial data as an intermediary.

Google can then use this information and platform to launch credit card services and provide other investment accounts in conjunction with the banks. Such an ability allows them to, together with the banks, bypass other payment providers, including credit card companies and payment providers.

This approach would make sense, particularly if the other key piece of this upgrade is connected with the user’s personal finances.

One can see the potential of Google Pay based on the business model of Personal Capital, one of the best providers of products for budgeting your personal finance. Personal Capital provides an excellent free budgeting tool overlayed by planning advice — including a retirement planner and cash flow management advice. It is provided entirely free.

However, Personal Capital also provides wealth management services. Some of the users allow their assets to be managed by Personal Capital in exchange for a fee. In addition to the online tools, Personal Capital offers these users who sign up for wealth management a team of financial advisors.

The provision of budgeting and personal finance services is only the gateway to the actually lucrative business of managing wealth. Personal Capital has over 1.5 billion dollars in assets under management (AUM). This AUM is derived from users using its tools to monitor over 150 billion dollars of assets. Given its reach, Google Pay users will certainly monitor a lot more assets than 150 billion dollars using Google Pay. Google can then sell access to a large customer base of users requiring wealth management services in exchange for a hefty fee.

This Is Right Up Google’s Alley — Provider of Global Services to Billions — And Google Pay Has Succeeded In India

Just because Google has a broad base of users does not guarantee that it will be successful in such a crowded marketplace. However, Google has succeeded very well in areas where it relies on providing a free but high-quality service but monetizing thr service by extracting information based on the underlying data retrieved (think Google search engine, Youtube, Gmail, Google Photos, Google) from billions of people. It is difficult to think of any other non-bank entity which can continue to provide banking and financial planning services without charging any fees to billions of people.

Also, Google is uniquely well-positioned to make the experience of paying and using banking applications, frictionless. This is because it has years of experience making amazing applications for billions of users, including a browser, an app store and has even developed an operating system. Many everyday uses of a digital wallet are already partly built-in Google Pay. You can split a bill, using your camera to scan a user QR code, pay a merchant etc. The developers over at Google have made payments a breeze. Improving it will take it to a whole new level.

More critically and this is particularly important for a payment system is that Google has, excluding China, a global presence. Unlike CashApp, Google Pay is available in India, Australia and many cities in Asia (outside China). Cross border transfers and micropayments are essential to most of the developing world, and Google can easily tap into that space as it has a global reach.

Photo by Karthik Chandran on Unsplash

Not many Americans know this, but Google Pay is the top digital payment platform in India and has over 60 million monthly active users in India alone. Many of these transactions are peer to peer and are microtransactions. It is precisely how widely adopted Google Pay is in India that has encouraged Google to bring those features worldwide. Google Pay is also used in Japan, Russia and Ukraine.

Google Pay Is Semi-Anonymous But Acceptable to Law Enforcement

Google Pay also has the advantage of being semi-anonymous. Using Google Pay, it is possible to be semi-anonymous (hiding behind an email address) if you are entering into transactions (e.g. adult services) which may be potentially embarrassing. At the same time, this is not an issue for law enforcement because the Google Pay account would still have to be linked to a bank account and traceable for law enforcement purpurposes. One can imagine that Google Pay will become the payment provider of choice for anonymous payments.

The truth is, where it comes to mobile payment apps, regulations have not entirely caught up. Often banks are subject to stricter controls than financial payment applications. The lack of parity in regulatory controls is changing slowly, but Google, by its sheer reputation, size and financial might, will be able to navigate these regulatory waters very well. Google has also become an important player in many economies.

What Does This Mean for Us In The Larger Context?

If I am right, does it mean that you should buy the shares of Google? Does it mean that we should lobby for technology companies entering the financial marketplace to be regulated like banks? There are other factors to consider to provide a cogent answer to these questions, but one thing is certain — technology companies are now, led particularly by Google, reaching into one of the most important aspect our lives.

My view is that technology is good for us — all of us, including the underprivileged. Particularly where technological systems replace antiquated and often oppressive systems and structures, they should be celebrated. However, the mere fact that these systems have to operate within the capitalism framework of profit makes them susceptible to be abused. After all, giving someone your financial data and allow them to influence you is straight out of an episode of Dark Mirror.

These developments would be likely to result in abuse and erosion of privacy. The ability for governments, corporations, and other large entities to control you will intensify. However, in the case of Google Pay (and Plex), there is no question that their vision of payment, personal finance and banking represents the future. And Google can and will create it. As Larry Page says, “Lots of companies don’t succeed over time. What do they fundamentally do wrong? They usually miss the future. I try to focus on that: What is the future really going to be? And how do we create it? And how do we power our organization to really focus on that and really drive it at a high rate?”

Google will create the future of banking. Do you not agree?

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