(Award-winning tech columnist Jon Markman publishes of Strategic Advantage, a popular daily newsletter about the digital transformation of business, entertainment and society -- and how to invest in it. Click here for a free two-week trial.)
Google launched a sweeping redesign of its Pay mobile application Wednesday and it is kind of big deal because it finally brings all of the company’s strengths to digital wallets.
The new Google Pay adds insights and search across payments, Gmail, Photos, bank and credit card statements if you opt in. The enticement is lots of rewards, and a slick user interface available on both iPhones and Androids.
There are some caveats. Alphabet ( (GOOGL) - Get Report), Google’s parent company still makes the lion’s share of its sales from advertising. Some consumers may be turned off by the idea of surrendering personal financial data to an advertising company.
However, in a blog post Google Pay product managers offer assurances no data will ever be sold to third parties or even shared with Alphabet’s ad businesses.
Also, it turns out that most people actually do trust Google as a brand. Pay has 150 million users in 30 countries. And ad-supported services such as Gmail, Photos and of course Google Search are among the most popular mobile apps.
Google won over consumers with incredibly simple yet effective software. The new Pay app takes that clarity to the extreme.
For example, to pay a friend just tap on their photo inside the app, add an amount and hit send. The transaction happens instantly while creating a private encrypted conversation. For group repayment, enter the amount, add the friends involved and hit send. The app contacts your buddies with a message requesting payment for their share. As they pay, their photos within Pay transform from ghosted to full color. Digital peer pressure is not subtle.
For businesses the app automatically keeps track of the shops you frequent both in person and online. Like your friends, these relationships appear on the home screen. Tapping on business logo brings up your transactions, loyalty programs and rewards. Stick a pin in that.
And this is where Pay gets very Googly.
Google software engineers have been able bring a bunch of neat things completely inside of the Pay application. Josh Woodward, the product manager, says users will be able to order food (and skip the lines) at 100,000 restaurants, check the price and buy gas at 30,000 stations, and pay for parking in 400 cities without downloading other apps. And there are discounts and special offers, too.
Many of these goodies are in the Explore tab, a quick swipe left.
Google’s algorithm populates member rewards based on transactions. This means cash back and discounts from brands members already use. But what’s cool is the only interaction required is selecting the offer. Google Pay will automatically credit the reward when the item is purchased. There are no coupons to keep track of.
Ease of use is a big part of what made Google the most powerful software business of the internet era. The other part is finding relevant information quickly.
A swipe right in Pay brings up the Insights tab. This is full on Google Search, except for every financial transaction across time frames and uber-specific categories like pet food. The software uses algorithms to learn and automatically remind users about upcoming bills or nudge them to save more.
PayPal’s Venmo and Square’s Cash applications can do some of these tasks, but not all. Neither has access to Google’s trove of user data nor do they have the scale.
A white paper from Ark Invest, an investment manager, estimated that monthly active users for both apps were at less than half that of Google Pay. It’s also worth noting Apple ( (AAPL) - Get Report) and Samsung and Walmart ( (WMT) - Get Report) are investing heavily in digital wallets.
It’s also important to keep in mind that Alphabet has come under federal scrutiny for anticompetitive practices, which could potentially require the software maker to spin off or close down the Pay service.
And while this is not a zero sum game, for example Ark analysts see digital wallets as an $800 billion opportunity, PayPal and Square investors should anticipate slower growth as bigger firms like Google ramp up more robust offerings.