As the landscape for payments and banking evolves dramatically, Ivo Gueorguiev, Co-Founder and Executive Chairman Paynetics spoke to Payment Expert the relationship between Google and the banking sector and how it has been impacted by the pandemic.
Payment Expert: Firstly, can you tell us a little more about the relationship between Google and the banking sector and what it means for consumers?
Ivo Gueorguiev: In my opinion, at this point in time, Google is merely testing the waters. The company would like to see how consumers react to their presence in the market and what traction their platform can get with their financial products. It is still very much in an exploratory phase; there is no real impact on consumers as they still get the service from a bank and, in a way, it is just a different distribution channel. There will be a much wider impact if Google decides to scale up the initiative and ultimately internalise the service.
In principle, there is a huge potential for them to simplify their services if they are all based on and wrapped around the other services that Google provides, predominantly by creating a single point of contact and eliminating the need for multiple sign-ins. Google has an enormous reach and if they employ their rails and channels successfully, it could mean the emergence of a powerful alternative payment service provider.
Payment Expert: Within the European market what will Google need to address in terms of serious GDPR and other EU related restrictions, which don’t exist in the US market, with its current offering?
Ivo Gueorguiev: Google has been relatively slow in growing its presence in the European payments sector – this is one of the reasons that Google Pay is lagging behind Apple Pay in the region, but they are catching up. As a company, Google, has an uneasy relationship with the EU’s anti-monopoly regulators and they will be very careful in moving forward with any approach. I think that Google will wait to see how its experiment in the US goes before they proceed with similar initiatives in the EU.
Therefore, I do not expect any major moves from Google into the European payment space in the next two years. But in principle, Europe offers the company some great possibilities. The market is actually much more homogenous in terms of regulation than the US, and either through partnerships or even directly, Google could become an important player.
Payment Expert: Has the global pandemic influenced or impacted Google’s relationship with banking at all?
Ivo Gueorguiev: COVID-19 has substantially accelerated the trend towards the digitalisation of payments, and this trend is definitely here to stay. Cashless payments, self checkout, e-commerce and contactless have all been given a tremendous boost and we have seen all major players adjusting their product lines and roadmaps to accommodate this.
The US is an interesting example – they are still struggling with replacing magstripe with Chip and PIN. Faced with this new reality, US banks are now racing to introduce contactless tech, and so in a way leapfrogging Chip and Pin entirely.
In this new reality, Google is perfectly placed to provide solutions and I think this has accelerated their efforts in the space, which have resulted in wider partnership arrangements. It is reasonable to assume that with the advent of the “new normal” – which I can summarise as cashless, contactless and mobile-first, with great focus on user experience and user interface – Google will be incentivised to continue to actively develop and offer payment services to its clients.
After all, it has such a dominant presence in mobile, search and email that extending into the banking and payments space makes a lot of business sense – the sector provides an obvious area of growth for tech behemoths such as Google or Apple.
Payment Expert: Do you believe the future of payments will be driven by a new breed of ‘regulated fintechs’?
Ivo Gueorguiev: Yes, in my eyes this is the best way forward for the industry. “Regulated fintechs” – so those fintech companies that are fully regulated in as many regions and so comply with as many financial regulations as possible – can shorten the time to market for new, innovative financial technology products and also make them more competitive in the market itself.
We work in a fast-moving, exciting and transformative industry, but this is often hampered by legacy technology, large corporations with a traditional mindset and the ‘old way of doing things’. Regulated fintechs can bring energy and dynamism back into the financial services industry, but in a way that is genuinely useful and progressive for both those working in the sector but also the end-users of the various products and services we help to develop.
Payment Expert: In terms of the future landscape for payments, how important is it that companies can bridge the gap between disruption and innovation, and the restrictions of the industry which come from complex regulatory frameworks?
Ivo Gueorguiev: When it comes to looking to the future, collaboration within financial services is absolutely imperative. Yes, competition is important and has its place – we wouldn’t be anywhere without a competitive market! But, in 2020, the partnership between more traditional financial services corporations and newer fintech companies is a delicate one to navigate and manage, but holds so much potential to really boost and transform the industry as a whole.
Fintechs that can bring disruption and innovation, but also have a deep understanding of the complexities and intricacies of the industry, will be able to work effectively with more traditional institutions to ensure that we are always pushing the industry forward in a way that is of value to the businesses and consumers that we serve.
Fintechs can also bring elements to the table that BigTech still lacks, including:
- Deep domain knowledge: I have no doubt that BigTech will either dominate or be important players in bread-and-butter financial products, if allowed to do so by the regulators of course. But I do not believe that they can be competitive in the more sophisticated and intricate products, so that is where we can focus our efforts.
- Innovation and the ability to be on the forefront of changing consumer behaviour: BigTech is no longer on the front line – these companies have become very big ships that are difficult to manoeuvre. Now, their focus is on maintaining their dominance and leveraging it, and payments will always be a side business for BigTech.
- A local mindset: the market specifics grow exponentially as you move to more sophisticated products and that is where fintechs have an advantage. A good testament to that is the introduction and withdrawal of WhatsApp Pay in Brazil – it shows how BigTech offerings may be unsuited to the complexities that come with it. Unlimited resources and user bases that reach into seven figures are simply not enough to create a viable product offering.