Google’s rebranded ‘Tez’ gives it a path become a global payment giant

Google has provided an unprecedented preview of just how powerful a threat to payments incumbents they really are.

They’ve shown the speed at which they can and do move. But most importantly, they’ve given European payment providers a live demonstration of what they’ll do as soon as they’re allowed under the regulatory technical standards governing PSD2.

When Google launched Tez in the Indian market, less than a year ago, it was experiment that European banks needed to watch carefully. Prior to Tez, they’d played it safe on the payments front by turning Android phones into NFC-enabled and card-funded payment tools, much like Apple and Samsung.

Andrew Harrer/Bloomberg

With Tez, they were testing a model that saw great success for Alipay and WeChat Pay in China, the mobile payment schemes in Scandinavia and Venmo and Zelle in the USA.

The catalyst for choosing India as their test market was undoubtedly the change in regulation that saw India’s banks compelled to open their accounts to licensed third parties in an attempt to drive banking innovation. If this sounds familiar, it’s because it’s exactly what European payments regulation, the second payments services directive (PSD2), is trying to do.

They followed a naming formula that had worked in the US (with Zelle, owned by five of the largest U.S. banks) and Scandinavia (all the successful mobile payments apps have a different name to their owner banks).

But Google is Google and now that this experiment has yielded an incredible return with 55 million downloads and a reported 750 million transactions, they’re making it clear who owns this success.

The service formerly known as Tez has now earned the mother ship’s moniker to become part of the Google Pay brand which is available in more than 20 countries.

Google plans to make Tez Google Pay an all-encompassing payments service in India, with grand ambitions to become the AliPay of India and then compete with AliPay across Asia and on a global scale.

Already having introduced messaging and bill and utility payment functionality, Google now plans to push into online and offline retail, as well as offering on-the-spot micro-loans.

Obviously, Google has a distinct advantage over payment incumbents - after all, it’s the most innovative tech company in the world. However, the message and lesson for banks or anyone thinking that their payments models are safe is now crystal clear. It isn’t.

They now have a validated and ready to roll out mobile payments model - all within less than one year. Imagine how fast they’ll roll this same model out across all EEA member countries who have to comply with PSD2? If it took them less than a year to launch, test, develop, iterate and gain 55 million users in one region then the possibilities for Europe (and the rest of the world) are mind-boggling. I have been saying this for a long time and now there is substantive evidence to back up the fact that the tech giants are the banks and payment providers biggest threats.

The regulatory technical standards (RTS) guiding the implementation of PSD2 across Europe expire in September 2019. Banks have until May 2019 to expose their open banking plans. This gives a would-be Google Pay challenger around eight months to really get a head start on trying to own their own and acquire new customers using a similar mobile payments model."