How Google Pay is refining and reimaging mobile-first daily banking

Google launched a redesigned Google Pay app that can help you seamlessly manage your money. At present, the app only supports the markets in Singapore, the US, and India. It is also unclear when Google Pay Canada will receive these upgrades as even the existing send and receive money feature still doesn’t work in Canada. Nevertheless, there are some interesting takeaways from this launch regarding people, money, and banking.

In my previous article on how Apple Card and Apple Pay Cash can pave Apple’s way to be a micro bank, I spoke about a plausible future for Apple in Financial services. Apple could venture into the banking space with interest-bearing transactional accounts (hybrid checking and savings accounts), consumer financing, and microinsurance. However, Apple is yet to indicate its plans to offer banking like services, but it was in a way first to strongly signal that tech companies don’t need to be a bank to get into banking; they just need banking partners.

Coming back to Google, it went through several iterations from Android Pay, Google Wallet to present-day Google Pay. In the latest iterations, it has refined and reimagined mobile-first banking for the future. It includes cues about financial interactions designed around our relationship with money.

Let’s unpack each of them.

1. Pay: If you see some of the leading fintechs, they all are payment based ventures such as Paypal, Paytm, Samsung Pay, Alipay, Venmo, and Square Cash app. Since payment and transactions are the only banking activities that one performs more frequently and regularly than any other banking activities, these apps and services have a high engagement with the customers than with the banks where they hold their savings and investments. This increased engagement builds trust and behavior. But pay is not only about bills or transactions with a business. You could be paying your friend or lending your family member some money, or even receive money from someone for a shared expense. Today these activities are so common, yet there is no seamless solution for it. You need to juggle through multiple apps and clicks to get this job done. You would use Splitwise to split expenses, request or send money through Venmo, or pool money through Paypal for a group gift and then track everything separately in those apps. Google Pay relieves you from all those apps and gets most of those jobs done simply via chat. In addition to making contactless payments or scanning QR codes in the offline world and securely during online shopping using your credit card.

Mobile payments are growing huge. Google and Apple are not the only ones; there is Samsung, Oneplus, and Xiaomi are also coming up. Samsung had Samsung Pay for quite sometime, now they are coming up with Samsung Debit card powered by SoFi. OnePlus has also announced its plans to foray into the mobile payments domain. Xiaomi also offers mobile payments through MiPay in India and China. Some of these players can either become a marketplace for financial products or build their own banking products. Mobile Payments interfaces with digital wallets and banking accounts will create a new meaning for day to day banking.

2. Explore: Deals and cashback rewards are a growing expectation, especially among Gen Zs and Millenials. Money through deals and cashback rewards are less about money saved but more about getting free money, and who doesn’t like free money. The growth in the number of deal and comparison sites are an indication that we all are deal hunters if we are willing to make trade-offs. Similar to paying or requesting money for shared expenses, getting deals and offers is not easy. It’s a manual and fragment experience. Google Pay looks to simplify this by curating deals directly from vendors based on your transaction and making the deal redemption process super easy.

3. Insights: Every bank now wants to offer some form of PFM capabilities for its customer. Most want to be seen as a modern and digital bank, but almost all fail to deliver any value to the customer. Most customers spread their expenses across multiple credit cards or savings and investments across various institutions. Banks are extremely protective of their customer data. Unless your preferred bank can read your transaction data from other FIs through open banking or FDX setup or the use of financial data aggregators like Plaid or Flinks, it can’t deliver an accurate financial health picture through its PFM solutions. Today customers get this job done via third-party PFM apps with basic cash flow and net worth calculations to debt management analysis and cash flow forecasting capabilities. Another fragmented personal finance experience and journey. Google Pay through Insights shows all cash inflow and outflow across your Pay account, linked credit card or bank accounts, and any scanned receipts for any cash payments along with smart and intuitive categorization of transactions. It only provides you with essential insights to help you with day to day personal finance decisions with no additional bells and whistles. You don’t need to open any other PFM app for daily financial decision making unless you want to look for some complex financial decision where Google Pay Insights is failing. With Google’s AI insights and NLP capabilities, it will be possible that someday something like a Google Assistant can give you recommendations on daily financial decisions.

Plex the game changer

With the above features today, it may be competing with individual apps such as Paypal, Splitwise, Mint, or Honey, but it can directly compete with traditional banking products. Google doesn’t need to be a bank. It only needs a banking partner because customers don’t expect to bank with Google; they want to use banking like services from Google.

Checking and Savings account with no monthly fees, no overdraft charges, and no minimum balance requirements from Google could be a gamechanger. It can move onto a trajectory that I speculated for Apple in my previous article with the bank accounts.

Checking account has almost lost its meaning and purpose. It is a place where you receive your paycheck or a central place to hold funds temporarily before moving it to a better place. It’s no longer an indicator of your primary bank but the main entry point for most of your cash inflows. Similarly, a savings account is an account you would prefer to use for short-term goals because it offers you capital protection and interest-earning. Google is undoubtedly eyeing the direct deposit volume and money that remains liquid and idle in the safety net and goal-based accounts. It can displace these deposits from traditional banks.

Google Pay is reimagining these traditional banking products combined with Pay, Explore, and Insights. You would receive your paycheck in the Plex checking account, use it to pay for credit card bill and other expenses and move it some or all of the balance to savings accounts for your goals. Money that comes in, either from your paycheck or a friend, into these accounts may help Google earn interest income. As it is fully digital, it has no major operational expenses like traditional banks, so it could offer you better rates than others.

Is that where Google stops? I don’t think so!

While Google says it wouldn’t be sharing the data with other parts of Google or feed into the company’s massive digital advertising operation, but it will still know a lot about your financial attitudes and behaviors. It doesn’t need to become a marketplace to sell other financial products to you, but it can well support you with financial service offerings powered by its partners and personalized for you.

1. Buy now, pay later. A fastest growing trend and expectation. If you grant access to Google to read your financial transactions, it can very well learn about your intent to pay and ability to pay and can create its own creditworthiness systems and offer you to pay fully with Google Pay for your purchases and payback to Google in installments with almost no interest.
2. Microloans: Pulling in your credit report and combining it with the financial history with Google, it can extend the buy now, pay later, and match it up to a microloan to fund your short-term goal.

It won’t be very likely for Google to go beyond these banking services and offer complex financial products like mortgages. Still, it can bundle up its banking offerings with other services such as storage, etc.

Google Pay can be a good blueprint for banks to offer a differentiated personal finance experience to its customer:

1. P2P transfers are not only about moving money between people’s accounts; there are social aspects as well, such as pooling in money, lending money, and splitting expenses.
2. Chat and transact with friends is a social experience
3. Maximizing on rewards and savings is a loyalty and experience driver
4. Financial mindfulness helps in building a better relationship with money

Opinions expressed are solely my own and do not express the views or opinions of my employer.