Google Presents Biggest Threat to Banking

The Google Wallet product announcements at I/O 2013 present a perfect illustration of how disruptive the company has become. While the Gmail integration and Instant Buy API may not appear that groundbreaking at first glance, when reviewed in the context of Google Glass, they take on a whole different light.  With Glass as the form factor and integrations into Search, Shopping, Offers and Wallet, Google could change the face of banking and payments as quickly as you can say, "OK Glass."

There can be no doubt that Google Wallet hasn't achieved the success originally anticipated.  If reports are true, the upper echelons of Google management were unclear about the long-term direction of the serial underperformer.  Over the last week, however, the fog may have started to settle. Google saw division Vice President Osama Bedier exit, terminated the rollout of its plastic payment card and also announced two new compelling features.  In doing so, Google sent out a very clear signal of intent. 

The Google Wallet integration into Gmail delivers a great feature in a familiar setting.  It allows customers to simply attach money to any email they send.  Besides offering a slick user experience, the product has natural virality sitting at its core.  When payments are made between two Google Wallet customers, the funds are deposited instantly.  If recipients don't have a Google Wallet account, they are prompted to create one to collect their pending payment.  It's a simple and effective way to encourage new registrations.

At the same event, Google also announced its Google Wallet Instant Buy Android API.  The Application Programming Interface offers a straightforward payments option to merchants selling goods and services on native Android apps. The beauty of the API is that it resolves a merchant issue – the often complex selection and integration of a payments provider – and makes it much easier for customers to buy on a mobile phone.   

Both changes are fantastic steps forward for the Wallet platform.  Google has understood that it needs to take customers on a journey.  Integrating Wallet into familiar terrain makes the proposition less scary for first-time users.  It's the equivalent of doing your first driving lesson around your local backstreets. While Google has traditionally succeeded with its shock-and-awe approach, new payment methods historically have a much longer gestation period. 

Even though Google may have lost a few battles along the way, it is positioning itself well to win the war.  The new services represent a virtual slap in the face for the likes of banks and PayPal.  If added to the already impressive arsenal of Google Glass, they potentially represent a knockout punch.

Think about it.  You are in a Walmart and you are looking for a new television.  Using Glass, it could be as simple as:

"OK, Glass, tell me my balance," and "OK, Glass, purchase that television." 

Using Optical Character Recognition, Glass could determine the type of television the customer is eyeing.  Glass could then use a mixture of Google Shopping and Search to determine the best available price for the product.  Using Google Wallet the consumer could then purchase the television directly.  Finally, with Offers, Google could offer a discount the next time you shop with Glass.  Each stage of the purchase life cycle is covered - discover, evaluate, purchase and engage.

This presents an absolute horror scenario for banks.  After you link your Google Wallet with your checking account, there is no need to interact with the bank.  This means the complete dilution of the customer relationship.  Customers then stop logging into Internet and mobile banking and banks miss out on the opportunity to cross and upsell products.  The only thing that could make the scenario worse would be if Google was to launch its own virtual currency (it has to be on the cards) or extend its existing banking license to take deposits. 

So why would Google want to go down this path? It's not specifically about taking on the banks.  It's really all about data and then revenue.  By playing a more prominent role at the point of payment, Google can close the loop with advertisers.  Google could directly evidence how valuable its advertising is to merchants from the start of the purchase funnel to the end.  The additional data is also very attractive.  By tracking payments, Google could further optimize its Search, Advertising and Offers platforms. 

Google presents to me the biggest threat to banking today: a giant, multinational, technology-based company, with strong customer advocacy.  It has all the essential ingredients.  Google could do to banking what Apple did to music, or what Amazon did to print.  Sometimes the company you least expect has the advantage of disguise.  Perhaps banks could do with some Google Glasses after all.  Maybe it will help them to see what is happening right before their very eyes.

Michael Nuciforo is a mobile and digital banking consultant and the founder of Keatan who previously worked at Australia and New Zealand Banking Group Ltd. on the ANZ goMoney application and more recently was head of mobile banking at Royal Bank of Scotland managing the U.K. retail portfolio. You can follow him on Twitter at @TheBoldWar.