Money via email: will Google bring the breakthrough?

Sascha Breite, head of portfolio and positioning, SIX Payment Services

The idea of sending money via email is not entirely new. The likes of Bank of America, for example, have already tried to establish such a service. This month, however, a new financial player entered this arena: Google announced that it will integrate Google Wallet into Gmail.

Users will now be able to transfer money simply by attaching and sending. Naturally, this has been considered a game-changer, prompting a number of questions: Will this really change the way we pay? What are the implications for the European payment market? Sascha Breite considers the question.

This is undoubtedly a big announcement from Google, and although currently only available in the US, it is likely that this Google Wallet/Gmail integration will be moving into Europe within the coming years. So the first question needs to be: how popular will this new service really prove to be?

The first challenge for Google, and an important overall success factor, will be its ability to assemble a critical mass of users. According to Google, at present 2.4% of its Gmail users are from the UK – this falls to 2.0% in Spain and 0.9% in Germany. What’s more, there are no numbers available on the usage of Google Wallet for Europe – which all suggests that market domination in this particular field may not be as simple as one would initially think.

That said, it is largely agreed that the future of payments lies in direct peer-to-peer payments – and the more simple and convenient the payment, the more successful a service will likely prove. Gmail certainly has the convenience factor nailed, indicating a high chance of success.

Google logic and data payment

Another question to consider, however, when predicting the likely success of any new online tool, is the data factor. It is widely understood that Google is in the relevancy business. The more accurate the information it provides, the higher the price it can sell for. Therefore, the attraction of entering the payment market, and the subsequent profits, are not the only purpose of this move – there will undoubtedly be a premium placed on the additional information that Google will be able to gather from its users’ purchases and money spending behaviour.

When you take into consideration today’s fragmented online payment services, this step could bring Google into a position where it can merge different services into a new commerce ecosystem. From search, to finding advice on Google+, to buying the product via Wallet and Gmail – all could be done on the same platform. This is a massive, and undeniably realistic, proposition.

It all depends on whether users will choose simplicity and comfort over handing too much data to a single company. Google will be well aware of the importance of proving its trustworthiness with regards to private data to all audiences. Internet users are becoming increasingly aware of their data privacy rights. This payment service provided by Google brings the dilemma that users not only let Google know about what they search for, but also how and where they spend their money – a powerful body of information for one company to hold.

Legal and security concerns

Apart from entrusting Google with their data, entrusting Google with their money is the next consumer hurdle to adoption. This refers to the legal aspects of transferring money: If users send money via a service which is located outside their country, with terms and conditions based on foreign law, what will happen if they want their money back? Will Google be able to ensure the same quality of service and guarantees that banks are providing internationally?

It is often assumed that convenience in payments comes at the loss of security. This is undoubtedly a simple service and Google will be doing its best to tackle this issue; a payments security breach would cause untold damage to the brand.

However, there is always a chance that of the 425 million global Gmail users, some of them will have a security problem. Viruses, Trojans, key-loggers – all will try to hijack the service just like any other. Using the internet-based Gmail desktop on a PC could, therefore, result in fraudulent sending of money towards criminal accounts.

Competing for the next big thing

Let’s not forget that the other big brands are driving their payment innovations too. Amazon is increasingly extending its services for businesses. PayPal has gained big market share in the payment industry. Visa and MasterCard are launching their own services, V.me and MasterPass. Financial institutions are increasingly appreciating that they too need to be speeding up their own online banking and payment services, if they are to stay competitive in the long run.

For one of the players to succeed, many variables must fit together perfectly. One is timing: a good idea could be worthless if it is launched too early or the surrounding ecosystem cannot yet support it. Google may well be just right with regards to timing on this, in which case the next step is to gain global consumer acceptance.

Consumers across Europe are increasingly relying on electronic payments over cash – this goes some way to explaining why we are seeing increasing interest in online and mobile payments. All the emerging wallet initiatives – including Google Wallet and Gmail – are steps in this ongoing evolution from cash to electronic money transfers. After all, PayPal has now been providing an online P2P payment service for more than 15 years. Now Google follows with a similar, but simplified, service. The timing is strong and the consumer demand is growing – whether Google becomes the leading player or not, it is increasingly likely that peer-to-peer payments, rather than just being ‘the next big thing’, could actually end up becoming a natural part of our daily life.