PayPal’s PYPL stock closed the day down 1.5% on Tuesday to $42.10 after Google announced in a blog post that users would now be able to send and receive money in their Gmail app.
Alphabet’s GOOGL Google said that users would be able to receive and request money as an email attachment through their Gmail App on Android. This service will have no fees, and will work with other email services as well. Recipients can also arrange the money to go straight to their bank account. To use the new feature, users will have to set up a Google Wallet account if they don’t have one.
Google’s move to mobile could be a direct challenge to PayPal’s Venmo, the dominant person-to-person mobile payment app and social network.
Will It Work?
As personal finances become digitalized, users not only want payments to be faster and safer, but millennial users also look to share them. While the Gmail App allows users to send and receive money, users won’t be able to brag about their transactions like on Venmo.
Venmo users can send money to a friend and write a memo. After the transaction is completed, all of the user’s friends on Venmo will be able to see the amount of money sent and the memo. And it turns out that people are interested in knowing whom their friends eat with and where they eat.
“A lot of what we’re seeing there is that people don’t just come to transact. They ‘re coming there to see what their friends were doing,” PayPal’s chief operating officer Bill Ready said at a Morgan Stanley technology conference in late February.
One of the main reasons that PayPal is the top person-to-person vendor in the U.S. is that Venmo processed $5.6 billion in payment volume in the fourth quarter of 2016, an increase of 126%, the company said in its earnings report.
It is hard to say whether or not Google’s new feature will disrupt PayPal’s dominance in person-to-person transactions. With the introduction of One Touch, a faster check out option online, and Venmo expanding with their “Pay with Venmo,” PayPal is certainly fortifying its power in the online transaction service.
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