Google has found a way —indirectly, at least— to make its payment solutions profitable by increasing sales from its search engine ads by offering consumers a superior payment experience.
The tech giant has added two financial solutions to its product portfolio, which dominated by digital marketing services and technology infrastructure: a digital wallet, appropriately named Google Wallet, and GPay, a payment button that can be integrated into marketplaces.
But while other tech heavyweights such as Meta or Apple try to monetize payments or offer buy now, pay later (BNPL) services, Google is not looking to expand into credit or other financial products. Rather, its strategy is closely tied to search rankings in SEO (keyword optimization) and SEM (advertising and sponsored links).
“We are not looking for direct revenue through payment methods,” Armando Betancourt, leader of GPay alliances in LatAm, tells iupana from Mexico.
“But they allow us to help the ecosystem so that their digital marketing strategies don't stop at leads but move from responses to [sales] actions,” he says. “This deployment of tools and technology allows us to reach the region and help accelerate the adoption of electronic commerce while, at the same time, enabling our business units to offer better results in investment campaigns.”
While Google’s financial products don’t generate revenue from transaction fees, they eliminate friction during online purchases, which helps with conversions. In addition, the GPay button generates data that the firm can use to demonstrate that paying for search engine advertising leads to verifiable sales, which is a hook for companies marketing their goods with Google Ads.
Google is capitalizing on its dominance of the search engine market and its technological prowess to increase its income, leveraging tools that don’t make money on their own: Digital payments and account-to-account transfers tend to be free, which obliges companies to look elsewhere for revenue streams.
Betancourt says that when the GPay payment button is integrated into a travel platform, for example, it can use the credentials contained in the Google profile to facilitate payments. Also, if the Google Wallet is configured correctly, the internet browser can show flight results for airlines with loyalty program to which the user is affiliated.
Similarly, its Chrome browser stores card payment data provided that the user has given consent, allowing it to automatically fill out card details and minimize checkout time.
“At the end of the day, the idea is that this platform helps us to be much more precise and achieve better results,” he says.
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No more financial products
The incursion of Bit Techs into the financial arena has been highly anticipated, especially since consumers value the ease with which the firms deliver their services. Meta’s WhatsApp Pay, which last week introduced a functionality for placing orders and payments for SMEs and businesses through the messaging platform in Brazil, and Apple Pay Later, which allows payment by installment in the United States, have captured the public’s attention.
However, Betancourt says that Google has no plans to develop other financial products beyond Google Wallet and GPay, and he ruled out branching into lending or using data to offer alternative credit scoring.
“Our vision of the product doesn’t go that way. It’s simply being an enabler of more businesses,” he says.
Betancourt adds that another reason for promoting the wallet is to strengthen the Android mobile operating system, with which it seeks to compete in high-income segments. Google bought Fitbit, a manufacturer of smart watches, with that in mind. The devices can be used to make payments and therefore form part of its payment product expansion strategy, says Betancourt.
To be sure, in the race to acquire wallet users, Apple has taken the lead over Google. According to Insider Intelligence estimates, the two technology companies will end the year, respectively, with 48.7 million and 26 million wallet users in the United States.
Obstacles to expansion in LatAm
In Latin America, Google Wallet is only available in Brazil, Costa Rica, Chile, Ecuador and Mexico but the company plans to initiate operations elsewhere in the region this year. Regulation and technological integration are the main constraints to a faster rollout.
Due diligence is already underway in several countries where the company is verifying its compliance with local regulations, and it’s about to start the process in other countries, Betancourt says.
On the technological side, debit and credit card issuers are speeding up the tokenization of their cards with Visa, Mastercard and other networks, which will allow Google to integrate them into its wallet.
“It's a configuration that has to be done with each issuer, whether it’s a bank or fintech,” he says, adding that telecommunications companies and retailers are also adding their cards to Google Wallet.
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