[fc-discuss] Financial Cryptography Update: Google to do a payments system?

[iang@iang.org]

(((( Financial Cryptography Update: Google to do a payments system? ))))

                             June 18, 2005


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https://www.financialcryptography.com/mt/archives/000507.html



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Bob Hettinga points to two articles that report that Google is about to
release a payment system modelled on PayPal.  This makes sense.  They
have the user base, they have the Finance Application, and what's more
they have a scientific basis that has consistently allowed them to
avoid nonsense and hype, almost unique in the field.

I suspect they will give Paypal a run for their money.	Paypal was
always shaky, always an easy target for a good competitor.  The fact
that only dumb competitors tried to take them on should not be taken to
mean that Paypal are a stable well run company with many feet on the
ground.

Where Google will fall short is in the higher layers.  Particularly,
their regulatory and relationships side is likely to be their archilles
heel, that being a reflection of the company as full of geeks that
think there isn't a problem that can't be solved by a neat algorithm. 
They will shine in the lower layers and muddle along in governance and
accounting.

I don't think this will shake their eventual success, but it will shake
their cosy world views.  What is more interesting is what happens when
and if Google succeeds.  Microsoft will then move in as well and then
it will get very interesting.  The reason Microsoft aren't in is that
they can't afford to antagonise the banks;  those with long memories
might recall that they made a few choice comments in the mid 90s that
caused a few upset lunches.  But with Google protecting their flank,
there's no force in the argument that the banks don't want competition.




<http://online.wsj.com/article_print/0,,SB111905141149263168,00.html>

The Wall Street Journal

 June 17, 2005 7:54 p.m. EDT


Google to Offer Payment Service
 To Compete With eBay's PayPal

By KEVIN J. DELANEY and MYLENE MANGALINDAN
Staff Reporters of THE WALL STREET JOURNAL
June 17, 2005 7:54 p.m.


Google Inc. this year plans to offer an electronic-payment service that
could help the Internet-search company diversify its revenue and may
heighten competition with eBay Inc.'s PayPal unit, according to people
familiar with the matter.

Exact details of the search company's planned service are not known.
But the knowledgeable people say it could have similarities with
PayPal, which allows consumers to pay for purchases on Web sites by
funding electronic-payment accounts from their credit cards or checking
accounts. Some consumers like PayPal for the security it offers, since
it allows them to share their banking or credit-card numbers only with
PayPal without having to divulge the information to merchants.

Spokespeople for Google and PayPal declined to comment.

For Google, Mountain View, Calif., a payment service could represent a
significant expansion beyond online advertising, which generated 99% of
its $3.2 billion in revenue last year. Online-payment providers
typically generate revenue by taking a commission on each transaction.

Depending on the exact details, Google's move could potentially
threaten eBay's successful PayPal service, which generated $233.1
million, or 23% of eBay's revenue in the first quarter. PayPal has been
widely adopted by buyers and sellers on eBay's auction marketplace as a
way to pay for purchases. Recently, eBay has been trying to expand
PayPal's presence as a payment system for other Web sites. In the first
quarter, 71% of PayPal's revenue came from eBay auctions, the company
says.

"It could be a pretty big negative for eBay if it happens," says Safa
Rashtchy, Internet analyst at Piper Jaffray. Mr. Rashtchy said he
believes Google is also working on a classified-listing service, which
also would compete with eBay, San Jose, Calif.

The moves would highlight the growing rivalry between the two Internet
companies, even while eBay itself is a big buyer of Google's online
ads. For example, many eBay sellers now also sell through their own Web
sites, to which they attract shoppers by buying search-related ads on
Google.

Google has offered a hint that it might set up an online-payment
service. Its Web site says the company will eventually allow consumers
to pay to view videos online. But Google to date has not provided any
details of any payment-service plans. Google currently accepts
credit-card payments for some services, including advertisements and
customized research.

Rumors about a new Google payment service escalated following a panel
discussion at a Piper Jaffray Internet conference on Thursday. At the
conference, Scot Wingo, chief executive of ChannelAdvisor, a
Morrisville, N.C. e-commerce consulting firm, said he believed the
payment service would be launched soon. In an interview, Mr. Wingo said
he based his statement on questions from retailers with which his
company works. Mr. Wingo said the retailers have asked him whether
ChannelAdvisor would support the service, which some believe goes by
the code name Google Wallet.

During the discussion, Patrick Byrne, president of online retailer
Overstock.com Inc., recalls saying, "Yes, this Google Wallet sounds
like it might be great. But is all this public yet?" In an interview,
Mr. Byrne says he has not had any "substantive discussions" with Google
about a payment service.

Beyond a possible additional revenue stream, an electronic-payment
service could give Google more insight into the effectiveness of its
core advertising service. Google might be able to better track whether
users who click on search-related advertisements make purchases from
the advertiser.

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