Could Google Buy Discover To Create An Ad Based Payments Network?
In a big push for Andoid and mobile commerce, Google announced they are buying Motorola Mobility for $12.5 billion. This is an interesting development as the mobile commerce landscape unfolds and consumer preferences gel with Android OS having an estimated 39% of the mobile market share. (Here’s an interesting graph on the history of Android)
Google has a strong ecosystem for Android, but no-one can argue Google Checkout has had its challenges as a result Google changed direction by focusing more broadly on Google Commerce. Checkout is still active and may soon become more relevant.
Perhaps Google was taking the wrong approach with a traditional card-not-present service model. Maybe a more consumer focused issuing side could be a complete paradigm shift in the payments industry by offering an “advertising-based’ payment services model.”
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- Google tried to buy Groupon, Groupon says NO. So Google pushes Google Offers, Google Local, Google Places, etc
- Google launches Google Wallet which will be supporting NFC and contactless payments. (Yes this is with Citi and MasterCard, for now)
- Google Chrome PC launched as a stand-alone PC running the browser-based Chrome OS.
- Google launched Google TV. Think about "tv-commerce" - yes, card-not-present through your television with a click of a mouse, button or app. Motorola brings a long history or set-top box technology.
There’s more to be seen on how each of these roll out as a stand-alone services or will they collectively enhance the value proposition through ‘form-factor’ convergence and new business propositions – Google Wallet, Android phones, Android Tablets, Chrome PC and Google TV set-top boxes. The pieces are all there, especially when you consider Motorola Xoom is a phone, tablet and pc in one today. Think what future releases will include.
Convergence is happening faster than banks and card issuers can handle. And more importantly, the traditional payments infrastructure is so vested in legacy technologies supporting dated business models and regional politics it can’t change fast enough to keep pace with consumer behavior or the speed of Google.
Disruptive technologies and business model innovation are in overdrive, why shouldn’t the same apply to the plastic card and interchange model too? In the traditional payments scheme the issuer, acquirer, processor all take a little from the transaction. In return, merchant get paid and has liability protection at the POS but not in CNP. Very little has changed over the years. It comes down to pricing and volume for the most part and some stale, meaningless reward points.
If a traditional issuer can't address the demands of the market, then perhaps a new kind of payments organization can act as the trusted service manager, capture merchant transactions and revolutionize the payments business model.
Google already announced a deal with MasterCard to offer a Google credit card for Adwords, However is MasterCard the right brand or network? Maybe to start, but Discover could be an interesting partner or acquisition. The Discover network offers credit, debit, issuing, account management and access to an existing merchant infrastructure. If Google were to purchase Discover (think ‘gDiscover”), they could immediately change a dated business model and gain a legal competitive advantage that could last years. A “gDiscover” account could cut transaction fees to the participating merchant when connected to Google Local, Offers, Maps, Circles and Search. Google could then blend costs across many premium related services.
Google could offer attractive rewards to cardholders while driving great local offers to their network of merchants. A merchant services program like that could impact the choice of payment brand while delivering higher-value and security to both cardholder and merchant. Consumers would benefit by receiving more discounts, rewards and fun apps integrated into their devices, social media and account for easy tracking. Merchants would benefit through a single resource for search, advertising, apps and deals driving measurable sales and traffic into their store. This would be viewed as new revenue, not interchange cost and merchants would gladly pay.
Let’s talk CNP liability shift. By having the payment account tied to their Google Account and device, Google could provide a new level of risk management and fraud prevention through stronger authentication and transaction authorization. Each mobile device has power, security, network access and local storage. Google could easily force PIN protection when it comes to unlocking financial data on the phone, the app and authorize the transaction, anywhere in the world for anyone with a mobile phone for any type of payment. Even EMV can’t do that.
Tell us what you think….