As regulators struggle to get big technology companies in line, they are racing deeper into our personal space.
And one area where they have made big bets and small is payments. Notwithstanding the recent controversy surrounding the Apple AAPL Card and Facebook’s FB ambitious Libra digital currency, Alphabet GOOGL and Facebook have announced certain fintech applications.
In Alphabet’s case, it’s a checking account called Cache, branded and run by Citigroup and Stanford University’s Federal Credit Union, which will also take care of all financial and compliance activities related to the accounts.
Facebook Payments has the company’s own brand front and center. It allows you to pay for things like fundraisers, in-game purchases and event tickets within Facebook, Messenger, WhatsApp and Instagram. Person-to-person payments on Messenger and purchases from select Pages and businesses on Facebook Marketplace will also be facilitated. Facebook Pay supports most major credit and debit cards as well as PayPal and Stripe.
The two approaches are radically different. Alphabet’s focus appears to be on helping its partners’ digital businesses by attracting younger customers who are more comfortable with digital tools. So rather than selling customer data to advertisers or using it to serve them ads, it will use that data to create value added products. Alphabet may not charge for the service itself and charge for the value-added products instead. Or it could charge for both. More details will likely become available before the service is launched next year.
Although the company hasn’t said anything about it, a successful relationship could help it strike similar deals with other banks and institutions. As Caesar Sengupta, general manager and vice-president of payments at Google says, “Our approach is going to be to partner deeply with banks and the financial system.”
Banks would certainly be interested in such a service if recent research from Accenture (as quoted in the media) is to be believed. The research says that fintech startups are likely to grab $280 billion of banks’ payments revenue by 2025 on the strength of being able to provide free transaction services, instant payments and app-based virtual wallet services.
The company already offers Google Pay and Google Wallet, which are customer-focused payments processing applications like Facebook Pay.
Facebook’s blog says that while the company will use the nature of payments activity on Facebook Pay to target ads, the “bank account numbers you provide will not be used to personalize your experience or inform the ads you see.”
And it does provide an extra layer of security through device biometrics. It also keeps track of activity that may appear unnatural or unauthorized so it can send notifications and prevent fraud.
While users can see their transaction history within Facebook Pay, this wont be shared with friends or on the feed unless the user chooses to.
All the controversy around Libra hasn’t thrown Facebook off-track. Not have Google’s and Apple’s earlier efforts disappointed any of them, or Amazon AMZN (which is also trying to launch checking accounts). That’s because there’s simply too much money to be made here.
Additionally fintech companies (including startups) have demonstrated that there is real demand in the market. So naturally, the companies with significant resources and significant data on potential customers to provide personalized, AI-powered services will jump into the fray.
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