UPDATE – I no longer beleive P2P is focus, but rather Request for Payment and merchant integration. Blog forthcoming today.
I have no idea what this looks like, so congrats to Google for keeping this locked down. The following is my best “guess” on a pilot, based upon:
- What Google has launched internationally (Tez) and GPay through India’s UPI (highly recommended read here)
- Changes/Focus Bill Ready put in place before his departure as new CEO of Pinterest. Remember Bill was CEO of Braintree (the most significant acquisition PayPal ever made). Braintree enabled payment APIs for online and mobile merchants (among other things).
- Prior to Bill, Google’s support and advice for FedNow (see article)
- Understanding of what Banks want to accomplish (ex TCH tokens in mobile phones).
- My short time in Google during the creation and launch of Google Wallet. Particularly the exec team’s desire for a global P2P service.
Summary (hypothetical – 30% confidence)
Focus will be on P2P and Bill Payments, competing Venmo/Zelle
- Google will announce real-time payments in Google Wallet pilot with JPMC and at least 2 other banks this month
- High-Level Flow
is similar to Venmo: 1) sender registers debit card with Google, 2) Google provides user information to TCH through JPMC (or other bank), 3) JPMC approves user for RTP and creates token for RTP access, 4) User selects either P2P or Bill payments, 5) If the beneficiary is not registered (or non TCH bank), Visa OCT (or Zelle?) is used to transfer funds. 6) beneficiary is sent request to register (for future transactions).
- Google, JPMC will provide fraud utilities, TCH tokens will be issued in Google Wallets (a strategic objective sought after for 10+ years – see 2013 blog). Important to note that I also believe Apple will have TCH tokens in their handset within next 12 months.
- The addition of card network is necessary to expand beyond android (payor and beneficiary) and due to the TCH’s stunted RTP network (ie 4 originators, 400+ receiving banks) and that RTP Account numbers (RTPAs) have not yet been mapped to Bank Account Numbers (BAN) at most financial institutions.
- It will be interesting to see both TCH tokens and network tokens used in the same wallet. Once a consumer is registered with a TCH token, payment requests could be routed around the networks.
- Bank Goal is to create an API Pay Anyone Layer on TCH similar to UPI. These APIs will likely extend into Bank Mobile apps for either identification or fund provisioning (on android).
- I’m sure Google would also like to build this API layer on top of FedNow, but it also suffers from poor bank adoption (no mandate).
- TCH is focused on P2P, B2B and also bill payments (Request for Payment).
- Economic model? Tez has 1.3B users in India and is a free service. Will JPMC/TCH expand this for free to establish user base? Then perhaps look to enable merchants in a phase 2 with request for payment at POS (ie merchant payment
- Would a FinTech want to use a TCH API for RTP, network OCT/AFT or Plaid A2A (and take settlement risk). All three options require a bank sponsor as originator, these bank sponsors own the risk. The answer comes down to cost, speed and risk.
Who is impacted?
- Historically, Google has had no adoption of any payment innovation. They have also lost one of the US’s top payment leaders in Bill. There are lots of moving parts here from bank relationships to payment APIs. I give Google high marks for technology and vision. However, given their track record and lack of iOS footprint, I don’t think we will see much traction. Today P2P is free and instant with 2 leading schemes (Venmo and Zelle). Bill Payment also works well and is free (through banks).
- On the margin, Venmo and Zelle are impacted. There is a potential for larger impact to TPV if this service could be integrated with Zelle for either inbound or outbound transactions. This would expand the network effects substantially.
- In near future, I see the potential for Universal RTP payment APIs for Google Apps. This is what UPI is.
- Cross-border remittances may also be an opportunity. For example, the India-US corridor would leverage Google’s 1.3B Tez India users. However, neither TEZ nor TCH is set up to manage risk and compliance for cross border so I see this as unlikely.
I will wrap this up with a quote from Google to the US Fed in its offer to help FedNow learn from its success in India. Google offers to help the Fed to design a system that will:
“support real-time low-value and high-value payments, use standardized messaging protocols with extended metadata, and provide clear standards for an application programming interface (API) layer that enables licensed non-financial institution third parties to access and submit requests into this payment system.”
Question for my EU friends. If Google became a PSP and built same on top of SEPA … with “open payments” for the android world… would they dominate?