It’s Too Early for Google to Cry Havoc on PayPal

  • Grace Noto
  • March 15, 2017
  • 0

Google’s most recent play on payments doesn’t seem to have rattled PayPal.

Yesterday, the tech giant announced the ability for users to pay each other from their Android Gmail apps—which, yes, is a clear step into the P2P space and thus a move on PayPal’s territory.

However, the news is not exactly a large step (these money transfers were available before, for desktop),  and it’s not something that seemingly warrants the all-caps reactions it’s been getting on Twitter:

While PayPal has yet to offer comment on Gmail’s new P2P offering, the company’s stock appeared to speak for it, and it closed yesterday at a decline … of less than 2%.

PayPal closed the day down 1.5% in price at $42.10, a blip that would have been ignored, most likely, had it happened on any other day.

Taking out the stock glitch, then, does Google’s new play really mean anything for PayPal?

Talie Baker, an analyst for the Aite Group, told Bank Innovation:

Google Wallet has reinvented itself – it started out facilitating mobile merchant payments and because those types of payment are slower to take off than anticipated, it moved this capability to Android Pay and made Google Wallet a P2P service.

Looking at the various competitors in the marketplace, I think Google Wallet has a way to go to be able to take on PayPal/Venmo, or Square, or Zelle.

Google’s potential impact on payments shouldn’t be ignored—but as it stands, PayPal currently operates one of the top digital and mobile wallet services in the world, with nearly 200 million active customer accounts.

When it comes to P2P, the company is the parent of Venmo, an app whose name has become nearly synonymous with the act of sending money direct from one person to the next. As of the fourth quarter of 2016, Venmo’s payment volume was upwards of $5 billion.

James Wester, research director, worldwide payment solutions at IDC Financial Insights, told Bank Innovation:

For P2P, the user experience is critical all the way through the process—including onboarding, loading funds and cashing out. The big issue I see for Google going forward, and really any P2P provider going after consumers with an existing relationship to a financial institution, is how to make signing up and cashing out easier. Given the requirements for KYC and AML, that may not ever be particularly simple.  Zelle, on the other hand, will, presumably, already have the necessary information, so accessing cash to send and receive will be automatic. (Venmo has built its base out of consumers who don’t have that banking relationship, so they use the app itself as a de facto DDA.)

Google’s success with smartphones, mobile apps, data, and other technologies aside, the company’s previous payment initiatives, such as its “Hands Free” payment initiative, did not duplicate PayPal’s level of adoption, transaction volume, or brand loyalty.

The company’s Gmail service has a high number of users—more than 1 billion, as of yearend 2016—which should help with adoption of the P2P offering, but as of now, it’s a little too early to state (with any certainty) that the offering will cut into PayPal’s dominance of the space.

2 - Readers Like This Post

Leave a Reply