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Googlebank?

9 July 2021

From its lowly startup as a quirky search engine, Google has grown to the point where it is now a piece of critical infrastructure.

Not only does the company deliver search results but it has an insideously deep reach into all aspects of our lives. Every minute of every day it is busy gathering data on billions of people as they use the online world. What you like, what you don't like, what you eat, what you listen to, what you watch, what you purchase and much more.

All this data goes to build up a worryingly accurate profile of each and every one of us. That profile is then leveraged by the company to sell carefully targeted advertising in an industry expected to reach almost a trillion dollars in value within the next five years.

However, if you think Google has finished stretching its wings you'd be sorely mistaken.

It's starting to look as if Google is setting its sights on the banking industry and this is a move that should set some alarm bells ringing.

The banking industry has changed enormously over the past 100 years.

It used to be that you'd take your hard-earned cash to the bank and deposit it in a savings account. That money would slowly acrue and the bank would pay you a small but worthwhile amount of interest for the use of that money.

Deposit funds would be loaned out to borrowers who'd pay a little more to the bank than the bank was paying to you. The result was a win-win for all parties.

The depositor would earn some extra coin from interest, the borrowers would have access to money to grow their businesses, buy a house or whatever, and the banks would effectively take a commission by way of the differentials between lending and borrowing rates.

Page-forward to today and you'll find that the same basics are in operation but the dynamics have changed enormously.

Yes, the banks will pay you interest on your deposits but even though almost everything is now automated and "over the counter transactions" are all but gone, depositors may easily find that the interest paid for use of their money is immediately swallowed up with "fees and costs" that seem to apply to almost everything.

When interest rates are very low, these fees can very quickl eclipse the amount of interest you're being paid so in effect you end up paying the bank to look after your money rather than them paying you for the use of it.

The surge in property prices has delivered another windfall to banks. When you only had to borrow a few hundred thousand to buy a house the bank charged interest on that amount. Now, as the median house price soars closer to a million dollars, banks are obviously going to make an awful lot more from everyone climbing on the home-owner ladder.

As a result of these change, banks are now making ludicrous profits both from depositors and borrowers alike. Strangely enough, governments seem completely uninterested in reviewing the profit margins and acting on behalf of bank customers to ensure fairness and reduce profiteering.

But back to Google...

Imagine if you could side-step the banking system for a great deal of your day-to-day transactions.

What if people could simply pay you money and you could then spend that money as if it were cash but have it all handled electronically.

This is nothing new, it's the sort of thing that PayPal has been doing for many years now. However, it seems that Google is about to get very serious at doing the same.

In the USA Google is about to release a virtual debit card that will allow you to spend money from your GooglePay account at almost any terminal that has NFC. This would allow you to receive money, keep the money in your GooglePay account and then spend it where and when you wanted -- all without a bank account in sight.

Will it fly?

Well it's obviously not new. As mentioned before Paypal, ApplePay and other serivices have offered similar options before but Google is a mighty powerhouse and, at least from a security perspective, are a very trusted and widely recognised name.

Another deciding factor may be that Google plans to launch a "Google Bank Account" called Google Plex later this year. This would see quite an overlap between a simple digital wallet and conventional banking services.

Of course it also could all come to nothing. Google is renowned for dropping new products almost without warning when it pleases them to do so and this isn't their first abandoned foray into the digital wallet/payment area.

Should the banks be worried about Google muscling in on their highly profitable action?

I doubt it.

Google doesn't seem to be getting into the lending business, which is where the real profits are, so they seem safe for the meantime.

However... watch this space!

Related article: New Google Pay debit card lets you actually spend the money people send you (Arstechnica)

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