By Udayan Goyal
The revolution will not be televised.
The revolution will not be brought to you by Xerox In 4 parts without commercial interruptions.
The revolution will not show you pictures of Nixon blowing a bugle and leading a charge by John Mitchell, General Abrams and Spiro Agnew to eat hog maws confiscated from a Harlem sanctuary.
The revolution will not be televised.
- Gil Scott-Heron
So you ask: what does the seminal song above have anything to do with the Google announcement at its I/O keynote yesterday? As with many things in life, it is often the things that happen behind the scenes that have the greatest potential impact. Google spent pretty much the whole day talking about everything from Maps to its new music streaming service. But the one announcement that was the most revolutionary of all was made behind the scenes on their blog. Essentially you can now email money to your friends, just like you would email a photo or Word document.
Once you have registered for a Goggle Wallet account and linked it to your bank account, sending money is as simple as attaching any other form of digital data. In fact, you can even link your wallet to a debit or credit card but then you will have to pay 2.9% which is what Google pays to fund the account.
This is classic Google: complementing and substituting to drive search revenues. What Google is interested in is not the ability to make money on payments but to be able to capture the data around the payments.
By creating this functionality, it has essentially killed the wire transfer business of the banks and any business model around Peer-to-Peer payments initially at a domestic level. It also calls into question the ability of the likes of PayPal to charge money for these kinds of transactions.
The value of this data cannot be emphasised enough. Google wants to know what you are actually spending money on, so it can create even more targeted advertising. Ask a retailer what they are willing to pay to increase conversion rates and you will be surprised how high they are willing to go. If you think Google adwords are expensive, think about adwords where Google takes a revenue share on a successful sale of a product or service and you can just imagine how big the opportunity is.
The biggest issue so far with Google Wallet has been adoption. But they are solving this problem by making it instantly available to the 425 million active Gmail users. In addition, integrating it into their new wave of Android devices will also ramp up adoption.
In terms of wider industry impact, I think that incumbents will have to completely rethink how they make money around payments. The revolution is already happening: Innovative companies such as LevelUp are already giving away the payment leg of a transaction and charging for geo-located offers/loyalty applications which merchants are willing to pay for and MCX (Merchant Customer Exchange) is capturing data and creating a free, closed loop ecosystem amongst retailers.
The revolution will not be televised.