The Problem With Google Pay – Forbes

Google Pay logo is seen displayed on a phone screen. (Photo Illustration by Jakub Porzycki/NurPhoto ... [+] via Getty Images)

The revolving door to the office of the head of Google Pay is welcoming another new executive with Googles appointment of former PayPal executive Arnold Goldberg. According to Finextra:

Google's president of commerce Bill Ready says Arnold's recruitment is part of a broader strategy to take a more nuanced approach to financial services and the payment industry, including cryptocurrencies. Google wants to become the connective tissue for the entire consumer finance industry, not just certain partners, according to Ready.

In an interview with Bloomberg, Ready said:

Were not a bank. We have no intention of being a bank. Some past efforts, at times, would unwittingly wade into those spaces.

Goldbergs got a lot of work to do. Android Police commented:

Despite relaunching in the US with a new app last year, Google has struggled to get a foothold in the market. Google is placing its bets on turning Pay into a comprehensive digital wallet that carries more than just your credit cards. Anything that has to do with the exchange of money, Google wants to be a part of it.

It might be good to start by identifying the things that arent causingor havent causedGoogles payment problems. Its not a lack of talented personnel and leaders, and its not a lack of solid, leading-edge technology.

Google Payments problem boils down to two things: 1) No strategy, and 2) No organizational alignment.

Readys comment that Google has no intention of becoming a bank shouldnt come as a surprise. Despite his remark that the company has unwittingly waded into the space at times, there has been a single initiative from Google that gave even the faintest hint that they wanted to be a bank.

The Google Plex checking led publications like MarketWatch to conclude that Google planned on becoming a bank when the product was announced in November 2019. By offering the product through financial institutions (and not against them), Google clearly indicated its desire to be a bank technology provider, not competitor.

Google Plex was a product for banks. Google Pay is a product for consumers. And more than 80% of Googles total revenue comes from advertisers.

Google 2020 revenue breakdown

As Bob Dylan once sang, youre gonna have to serve somebody, and Google Pays problem is it doesnt know who its serving.

Sure, banks are advertisers, but thats not why they wanted the Plex productthey wanted it because it was a better checking account.

Consumers want convenience and featuresbut they dont want their user experience marred by advertisements (he said, knowing full well that readers of this article are getting inundated with ads on this site).

If Google Pay wants to be part of anything that has to do with the exchange of money, it needs to first figure out how its going to make money in the world of money exchange.

Apple figured that out for itself. They take a small cut on Apple Pay transactions, and have launchedin partnership with Goldman Sachsa credit card. Both products are tightly integrated with the iPhoneand in fact, wouldnt be the products they are if they were standalone from the iPhone.

Google hasnt figured this out. As Android Police wrote:

[Google Pays] first priority is pivoting from the abandoned Google Plex project. Moving forward, Google doesn't want to compete in the retail banking market. Instead, it plans to deliver third-party banking services directly to consumers, becoming the nervous system of the emerging digital economy.

What does that even mean? What third-party banking services does Google think consumers want to get from the company that they arent getting or cant get from other providers?

Regarding Readys point about having no intention to be a bank, from a consumer perspective a company that provides a banking service is a bank. Consumers dont care about the legal nuances of bank licenses as long as they see FDIC insured associated with their account.

Becoming the nervous system of the emerging digital economy sounds like a bunch of gibberish to me. If its Googles belief that payments are the nervous system of the digital economy, then the company is going to have to make a strategic commitment that goes way beyond anything theyve done to date in payments.

And if the nervous system of the emerging digital economy is broader than just payments, then I dont see how that goal helps the Google Pay group figure out which direction it needs to go in.

Android Police writes:

According to Ready, Google is also toying with the idea of incorporating cryptocurrency into its digital wallet. It's partnered with Coinbase and BitPay to look at how they can allow customers to store their crypto on Pay while still allowing them to pay in traditional currency.

This underscores Google Pays lack of strategic direction. After seeing the success that Square and PayPal have had with their crypto offerings, now Google decides it wants to get into the crypto game?

The challenge Google faces here is that Squares and PayPals relationships with merchants are transactional, payments-based relationships. Googles merchant relationships are ad-based. Big difference.

Then theres the matter of the organizational challenge facing Google Pay.

Googles Cloud division sells cloud computing and AI-based lending tools to banks. The Plex productwhich, remember, was sold to banksfell under the Payments division.

If Google Pay wants to sell services to banks, it should be aligned with the folks in the Cloud group who already sell to banks (there are a lot of high-powered ex-bankers in that group).

If it wants to be the central nervous system of the digital economy, it should be spun out as a separate company, because achieving that will require levels of investment the payments division isnt going to get from a company that derives 81% of its revenue from ads.

Mr. Goldberg has a tall task ahead of him. Fortunately, he has a team of top-notch technologists to work with. With some strategic clarification and direction, he can avoid the Google Pay revolving door.

The first rule of order, however is restoring trust:

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The Problem With Google Pay - Forbes