Google's announcement of Pony Express, a bill presentment and payment service, has caught the attention of many financial service providers including credit unions and banks.
This service is another example of how technology companies can feed their business models by launching services designed to improve on current offerings provided by other organizations, in this case financial institutions.
Though standalone bill pay services have not fared well historically, with 420 million users, Google could materially erode the hold credit unions and banks have — with even a relatively small adoption rate. Given the general state of bill payment within financial institutions, Google's adoption rate may be far from meager.
Most CUs and banks do not control the user experience or the data associated with many of their money movement services, including bill pay.
Traditionally, third parties that they rely on to provide these offerings offer single sign-on (SSO) portals where the customer or member can review bills and schedule payments.
These third parties control the user experience and hold the data associated with the user's activities. Financial institutions that use this approach are unable to provide many of the value-added services customers want.
In addition, credit unions and banks often miss the opportunity to save money because the existing model limits Least Cost Routing capabilities.
Google will control both the user experience and the data associated with their Pony Express service. What they do with the data will be critical to the success of the offering. If they use the transactional information to provide value-added services and personalized offers, they will be able to monetize that data in ways that most financial institutions have not to date.
In addition, it seems unlikely that Google would not contemplate how it might leverage its other payment offerings in relation to Pony Express.
Certainly, with the acquisition of Softcard, the Google Wallet is getting in position to develop a more competitive position against Apple Pay. Google Wallet has contained a peer-to-peer (P2P) capability since 2013, and P2P is another area where financial institutions have ceded the user experience, data, and in some cases, even their brand to third parties.
However this latest play by Google evolves, it is part of a strategy being employed by tech companies that has nothing to do with these entities becoming "banks."
Instead of "becoming a financial institution" and having to absorb all the costs inherent in providing and/or supporting various parts of the infrastructure that delivers the financial services consumers use, these tech companies are simply using the existing financial services infrastructure to drive the strategies fueling the growth of their businesses.
If these tech companies are successful in executing this strategy, then CUs and banks will be pushed further down the value chain, impacting their top and bottom lines.
Michael Carter is the chief marketing officer of D3 Banking.