As a diehard Google Workspace and Android customer, this past month has put my loyalties to the test. I’ve been on the receiving end of an all-out marketing assault from parent company Alphabet’s (NASDAQ: GOOGL) new Google Pay – aka GPay – featuring a free, bank-hosted, mobile checking account known as Plex. The combined volume of emails and push notifications have been substantial, leaving no room to characterize the new GPay / Plex campaign as anything short of aggressive. Additionally, Google has upgraded its GPay Balance functionality with a virtual card to allow for in-store, contactless NFC purchases via Android-enabled phones. Overall, these recent developments are eyebrow raising with respect to Google’s long-term strategy regarding consumer financial products and services, and its desire to be a major player in fintech; even more so given that in Alphabet’s July 27, blow-out Q2 earnings call, there were exactly zero mentions of GPay, Plex, fintech, and or payments – absolutely none. So, what’s really going on here? Is Google flexing its fintech muscle with the new and improved GPay / Plex offering, or is Google leveraging the new GPay to execute a higher level, long-term strategy that bolsters its core objectives – data aggregation, data organization, data analytics, and inferential AI?
To lock down a solid answer, it’s first necessary to understand the full extent and effects of the new application upgrades.
The base upgrade to GPay – excluding the soon-to-be-released Google Plex account – encompasses new and enhanced features in three areas.
The first is method of payment. In an attempt to go head-to-head with Paypal’s Venmo cards, which includes a Mastercard branded debit card from The Bancorp Bank, and a Visa-branded credit card from Synchrony, Google added the above-mentioned, virtual, Visa-branded debit card to its GPay offering. Both the old and new versions of GPay offer P2P payment functionality similar to Venmo. But, when Venmo added branded debit and credit cards, it forever changed the nature of its dedicated P2P payments application. Venmo’s adoption of linked cards opened the door for consumers to use their P2P payments app to make purchases at participating merchants. Lifting this constraint was a game-changer. GPay has now matched this functionality and put itself in position to go head-to-head with Venmo.
The second upgrade comes via GPay’s ability to aggregate historical consumer spending and payments information, and Google geolocation technology to promote merchant sales, coupons, discounts, and reward benefits. For qualifying purchases (at Google’s discretion), users can earn Google Rewards – cashback – which will be added to the users’ GPay Balances. Consumers can further maximize Google Rewards by enrolling existing, eligible credit cards in GPay’s Card-Linked Offers program. This functionality gives Google permission to share users’ payment information across multiple partners, including issuing banks and the card networks – Mastercard, Visa, and American Express– substantially expanding the universe of potential offers to consumers from merchants.
The third upgrade is what Google refers to as “financial insights”. One may recognize this functionality in the course of opening up a virtual checking account with a neobank or utilizing a “spend management” application to track personal finances. GPay will track spending and payments history from all accounts, cards, and transaction data sources linked to the application, and warehouse it in GPay so consumers can easily track bills, balances, banking fees, and a host of other personal financial data.
Taken altogether, Google’s three new GPay upgrades constitute a major evolution in functionality: it has meshed a mobile banking and digital wallet “super-app” with Google search, creating a monster value-add to Google’s core revenue base – advertisers – and the consumers who elect to use GPay as their primary financial application for banking and payments. In fact, with this functionality, if GPay could connect directly to a checking account, where it would have 100% visibility into all of its users’ banking information, pull and aggregate the same data in real-time, and use that data to magnify the power of the existing upgraded platform, absent the regulatory and bureaucratic hassles of having to become a chartered financial solution, Google, through GPay, would possess the infrastructure and connectivity to produce a tech-enabled open banking platform/financial super-app commensurate with a Revolut and Paypal lovechild on steroids.
Enter Google Plex.
Google Plex represents the final, complementary piece to GPay’s muscular new fintech platform. In partnership with participating financial institutions, GPay users can apply for and open a Plex personal checking account with an end-to-end mobile banking feature suite. The virtual checking account will have no monthly account fees, overdraft fees, or minimum balance requirements. Headlining the list of institutional participants, which includes banks and credit unions, is Citi, whose Global Consumer Bank (GCB) serves more than 110 million clients in the U.S., Mexico, and Asia, spanning 19 markets.
So, what do the banks and credit unions get out of the partnership?
GPay and Plex provide them with a state-of-the-art mobile banking platform on par with the most advanced, feature-rich banking applications to date, minimizing friction points in personal banking and payments, and maximizing connectivity to their customer’s financial services providers, without having to build or buy the same technology. Upon Plex account approval, banks will also be able to immediately issue card network branded, virtual, credit and debit cards, from which they can capture payments transaction processing fees. Lastly, because the nature of the financial institution / Google relationship is a partnership, it keeps Google out of the banking business, and the FIs can continue to leverage Google’s search engine with advertising, creating a powerful feedback loop to grow its customer base. In sum: banks and credit unions benefit from increased savings, cutting edge technology, additional revenue from new card issuance, growth in customer base, and user retention by way of semi-captive end-users who will be less likely to move to one of the new, burgeoning class of neobanks for similar products and services offerings.
But, keep in mind the question I set out to answer at the beginning of this discussion. Despite all the newsworthy application upgrades, technological innovations, and new FI partnerships, there was no mention of any of them in this past week’s earnings call. Zero. Also recall that as an Android and Google Workspace user, I’ve been subjected to a relentless onslaught of promotions, both push and email, to download the new GPay app and register for a Plex checking account. What explains the disconnect?
The conclusion Google is flexing its fintech muscle is undeniable. But, given the remarkable lack of mention on the earnings call, and as of yet, no explicit explanation as to how Google intends to directly monetize the new GPay and Plex account, there has to be something else at work.
There is.
Data.
It took a long time to get here but, in the end, it should surprise no one that the financial benefit to Google through the new GPay app and Plex account is a data play to feed its core business of data aggregation and analytics, and in turn, to improve search functionality through machine learning-based inferential AI which relies on enormous amounts of reference data to produce meaningful insights. Greater insights will (theoretically) lead to predictive AI, which is the Holy Grail of online advertising, and in turn, advertising spend.
Through GPay and Plex, users are giving Google permission to access most, if not all in some cases, of their financial data. High-level information is captured through GPay Balance. But that just scratches the surface. If you read GPay’s privacy policy, you’ll see that by linking accounts and cards through Card-Link Offers, users are allowing Google to collect and share a deep, treasure trove of financial information – information captured by the card networks, banks, payments processors, and merchants. And through Plex, Google gets access to the rest: mortgage, car loans…you name it.
Google may have just brought to market the greatest loss leader in history, since the launch of online search itself.
