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Google Pay, like its rival Apple Pay, hasn’t been a big success in the US. The company thinks this could change, however, as the world’s biggest economy upgrades to instant payments. The tech giant is hoping to repeat its experience in India, where Google payments are becoming a hit.
The US central bank is joining the 21st century and building FedNow, a real-time payment system that it says could go live by 2023 or 2024. Google thinks this is a great idea, and it sent a letter to policymakers last month suggesting that Federal Reserve officials could learn from their counterparts in India.
Specifically, Google is referring to India’s Unified Payments Interface (UPI), which was introduced in 2016. The Silicon Valley company says it worked with the country’s payment regulator and collaborated with domestic banks when it built Google Pay for India.
Google says the real-time, “open” interbank system has had amazing results: In four years, it went from 100,000 to 1.15 billion transactions every month. More than 140 banks now participate, up from nine when it started.
Google’s letter to Fed officials says its experience in India is a win-win-win proposition: “Every transaction made on Google Pay is done through our partnerships with India’s banks over UPI—this success is mutual as between tech, financial services and government.” (Google’s success in India hasn’t been a win for Paytm, the domestic mobile wallet, but that’s another matter.)
There’s a lot of chatter about the rise of super apps and mobile payments in Asia, where economies are leapfrogging the era of plastic cards and paper checks. This makes Google an interesting case study: The tech giant has shown that its payment app can thrive in emerging markets where financial services are spotty, but Google Pay has been weak in places like the US, with deeply entrenched financial giants, regulation, and card networks.
FedNow, however, could hit the reset button in America, and it sounds like Google is hoping to be closely linked to the new infrastructure, just as it is in India. Philipp Schindler, Google’s chief business officer, said as much at a conference in February: ”I can see us actually developing payment in emerging markets and then taking them to more mature markets.”
Success is far from assured, of course. Consumer habits can be slow to change, and other deep-pocketed companies, based in Wall Street and Menlo Park, probably have the same idea as Google. But Big Tech’s reputation could be the most difficult obstacle to widespread adoption.
If the blowback from Facebook’s plan to reinvent payments with its Libra cryptocurrency has taught us anything, it’s that political risk is probably the biggest barrier to Google replicating its success in emerging markets in developed ones. Google is an even bigger advertising behemoth than Facebook, with mountains of personal data continuously pouring in from its digital properties. Does it make sense to allow Google to collect even more data, and make it even more instrumental in daily life? Big American banks will also try to protect their turf.
As Google tries to make the most of the FedNow opportunity, its executives will have to convince officials, the financial industry, and American consumers that Google Pay really is a win-win-win.
This week’s top stories
1️⃣ Asian super apps like Grab pose a risk to the region’s traditional financial companies, says the Financial Times (paywall), even as they burn prodigious amounts of cash.
2️⃣ The European Central Bank is discussing the creation of a digital currency. Bloomberg reports that informal talks were scheduled this week during the governing council’s dinner meeting.
3️⃣ Swedish digital lender Klarna says it could attempt an IPO in US in the next year or two, but in the meantime is seeking out acquisitions and may raise private capital.
4️⃣ Goldman Sachs will launch its robo-advisor for retail investors next year, according to the Financial Times (paywall). Digital wealth management may be a difficult proposition for startups, but the economics are different for large, diversified firms.
5️⃣ Quartz was shortlisted for the British Journalism Awards in the business, finance, and economics category for our story about the growing cash deserts in Scotland. The Guardian won, with its cracking article about a British bookmaker that showered a high-rolling gambling addict with gifts to keep him betting.
The future of finance on Quartz
Freetrade will provide fractional shares for UK- and continental Europe-listed stocks. A Robinhood-style price war seems increasingly inevitable in Britain’s brokerage industry.
Speaking of Robinhood and fractional shares, the company is rolling out fractional-shares trading in the US. The feature isn’t as groundbreaking there, as SoFi already offers it and Charles Schwab will soon.
Are you planning a visit to China? If so, check out our guide to paying like a local—with Alipay.
If you haven’t already, check out our field guide “Beyond the fintech hype.” It includes an interview with Stripe exec Matt Henderson and a deep-dive into the biggest beasts in the unicorn herd.
Always be closing
- OneConnect, a Chinese financial company backed by SoftBank, slashed the valuation of its planned IPO.
- Bill.com raised $216 million in its IPO, valuing the company at about $1.5 billion.
- Qwil, a startup for freelancing financing, received $24.4 million in equity and $200 million in debt funding.
- Wefox Group, a German insurance startup, got $110 million in funding.
- Gojek is close to acquiring mobile point-of-sale startup Moka for at least $120 million, per Bloomberg.
- TransferWise’s Taavet Hinrikus is an investor in Ada Ventures, a $34 million seed-fund focused on diversity.
- Portify raised £7 million ($9.4 million). The London startup offers “income smoothing” for gig workers.
- Sonect received €7.7 million ($8.6 million) in funding. The Zurich-based company says it turns any shop into a virtual ATM.
- Camino Financial, a platform that makes financing to Latinx business in the US, got $8 million.
- M.Paani raised $5.5 million. Investors in the Indian retail-digitization platform include a Gojek cofounder, a Bain board member, and Candy Ventures.
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