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Big Tech In Payments.

By CB Insights


Tech giants from Amazon to Apple are offering new payments products in markets around the world. We look at these leaders' major moves in the payments space.


In 2019, one of the biggest storylines was big tech’s move into fintech. Over the span of the year, Google revealed it was working on checking accounts with Citi, Apple launched a credit card in partnership with Goldman Sachs, and Facebook launched Facebook Pay and took ambitious first steps toward creating a digital currency. Why all the sudden fintech moves? In recent years, a wave of fintech startups has shaken up the competitive landscape. Private funding to VC-backed fintech more than doubled year-over-year in 2018, totalling $41B. Suddenly, startups’ digital experiences were threatening incumbents across personal finance. Payments has been a natural focal point. As payments innovation rippled through new markets like the UK and India, incumbents like Visa have funnelled 57% more dollars into private companies year-over-year in 2019. The payments model is especially ripe for big tech, with the digital payments market representing a massive $3.6T opportunity. With superior UX offerings and an ability to route the traffic of millions of existing customers, tech giants can quickly launch new products and play the long game in the low-margin, high volume world of payments. In 2020, big tech has continued its advance into finance, with an emphasis on payments and emerging markets. (We’ve previously covered how big tech is attacking financial services and drilled into efforts from Facebook, Apple, Google, Amazon, and Ant Financial.) We dive into big tech’s recent efforts and strategies around payments below.


Facebook infuses payments across its social properties

Facebook is investing heavily in payments, which it plans to embed across its social products. Recently, Facebook formalised these efforts into a business unit called Facebook Financial, or F2. These initiatives include both traditional payments infrastructure through Facebook Pay (to be included in Facebook, Messenger, and Instagram) along with WhatsApp Pay inside WhatsApp. The company has also eyed cross-border payments powered by blockchain technology through Libra and Novi (its wallet formerly called Calibra). CEO Mark Zuckerberg said in a January 2020 earnings call that the company’s payments strategy is to be cost-competitive, because payments will feed back into Facebook’s core business in ads. Zuckerberg explained,


“As you can complete more payments in WhatsApp and Messenger, you would expect it to be worth more for businesses to bid more there, which is why we’re so far focused on making it so that the payments can be free or really as cheap as possible.”




So far, Facebook Pay’s efforts have focused on a Venmo like product for in-app payments across its social properties. This helps it collect transaction data for ad targeting. However, WhatsApp will be the growth engine for global reach. Zuckerberg mentioned in February that WhatsApp Pay would be unrolled to emerging markets such as India and Brazil (where it has 400M and 120M users respectively), as well as Mexico and Indonesia. More recently, on an April earnings call, Zuckerberg elaborated on how its investment in India-based telecom Reliance Jio will bolster WhatsApp Pay. Jio’s vision, Zuckerberg said, is to have millions of small businesses across India on 1 telecom network. That gives WhatsApp the chance to be the digital layer on top for discovery and facilitating transactions. Despite much-anticipated plans to initially launch in India, WhatsApp Pay first went to market in Brazil in June 2020, only to see regulatory clamp down a week after launch, with Brazil’s central bank citing concerns over competition. Reportedly, Facebook was seen as “front running” before Brazil’s national PIX system would hit the market, according Fortune. Facebook has tremendous power to get payments in front of users and authorities may be reluctant to give the go-ahead before local services can build competitive products on their national payments infrastructures. Regulatory decisions in Brazil have been a blow to WhatsApp Pay’s rollout, and the company is facing similar difficulty in India, where it has only been permitted to test with 1M users since beginning beta testing in 2018. The Indian central bank’s Unified Payments Interface (UPI) system undergirds WhatsApp Pay, but its service hasn’t yet gotten the green light due to data localisation issues in an ongoing Supreme Court case. Nonetheless, 2020 has highlighted Facebook’s willingness to endure regulatory headwinds for access to new payments markets. The company has said it remains dedicated to compliance and intends to keep trying in India and Brazil.


Amazon is adding payments capabilities, but might take a step back

While Amazon’s payments product attracts far fewer headlines than other big tech players, it is no stranger to the world of finance. The e-commerce giant has offered merchant loans since its early days (as we’ve previously detailed). In 2017, it began a push into payments with Amazon Pay, a digital wallet and payments network for both online and brick-and-mortar merchants. Strategically, Amazon already has customer payments information for seamless checkout across the web, and Amazon Pay could provide new data on where customers spending outside of the Amazon marketplace. Amazon has made strides to popularise Amazon Pay even further. In 2020, Amazon Pay was added as an option to Adyen’s payments platform, and Amazon also made a push into India with its Smart Stores initiative, which allows customers to explore products via QR codes and pay with Amazon Pay. The service was added to more than 10,000 stores and also debuted Amazon Pay Later, an interest-free credit product that indirectly competes with lending models like Afterpay and Affirm. In January 2020, Amazon reportedly began to work with Visa to test hand-scanning terminals that would link payments information to shoppers’ palms in its Amazon Go and Whole Foods stores and held discussions with card issuers like JP Morgan Chase, Wells Fargo, and Synchrony Financial regarding the security of consumers’ accounts. However, payment processors were said to be worried about losing leverage with Amazon in the long term. Despite this activity, Amazon’s Pay product has plateaued in news mentions since launching in 2017 and generates far fewer news mentions relative to competitors.



Ultimately, Amazon’s e-commerce business model sets it apart from the rest of big tech, and a “full-stack” approach — or becoming a personal finance hub like Google’s checking accounts — may be a distraction. Amazon reportedly scuttled its bank account project last year, indicating that it may be happy to go its own way even as its rivals make moves deeper into the space. The e-commerce giant appears to have been put off offering checking accounts by the additional regulatory scrutiny that such a product would entail. Further, the company can already offer payments, lending, insurance, and other core financial products without a chartered partner bank. In any event, offering a more seamless checkout offers Amazon plenty of strategic value, both online and offline. Its ambitions in payments seem scaled-back for now, but the right partnership with a payments player could quickly change that.


Apple Pay leads the pack in mobile payments

Among tech giants, Apple has perhaps made the biggest splash of all into finance. The company launched Apple Pay in the US as far back as 2014 and its product generates far more news mentions than the rest of the major tech players’. One 2019 estimate from eMarketer pegs Apple Pay at capturing 47.3% of the total mobile payments market in the US. (By comparison, Google Pay represents only 19%.) Apple Pay was also a pioneer in contactless payments, which has seen exponential growth in interest amid the Covid-19 crisis. Much of Apple’s success can be attributed to its early start in payments and ability to send notifications to a large segment of US smartphone users. More recently, it’s parlayed that into its 2019 launch of the Apple Card in a joint effort with Goldman Sachs. Notably, the card’s digital interface is channeled into a personal financial management tool within Apple Wallet and accrues cash back, paid out in Apple Pay. In 2020, Apple added interest-free installments for 12 months for certain Apple products if purchased with the Apple Card, which will pay an additional 3% cash back. CEO Tim Cook also said on a January earnings call it has more in the pipeline for its “buy now, pay later” product, but did not specify further. Apple leadership ramped up earnings call mentions for its Pay product in 2019, but has mentioned it far fewer times in 2020.



In June 2020, Apple made a move into financial inclusion by allowing people rejected from the Apple Card applications to improve their creditworthiness. In a notoriously opaque world of lending, the Path To Apple Card program uses notifications and personalised advice for users to improve their chances at future approval. After 4 months in the program, users are encouraged to reapply. Strategy-wise, Apple’s moves in 2020 signal an interest in further entering personal lending. Ultimately, though, these features serve to increase the “stickiness” of Apple Pay. Going forward, it will be worth watching how the company expands its pay-later feature beyond the Apple Store. As it stands, the Apple Card is a strategy that takes its existing assets — such as Wallet, FaceID, and the ability to send notifications to a significant number of US smartphone users — and channels them all back to Apple Pay flywheel. Unlike most other tech giants, Apple has a relatively smaller footprint outside of the US. Currently, Apple Pay is not in India, despite once indicating it would enter the market in 2018.


Google is revamping and betting big on India

As mentioned, Google Pay’s share of the US market lags behind Apple Pay at just 19% of US mobile payments users. Outside the US, however, Google Pay has taken off much faster, and was the most downloaded finance app in India in July 2020, according to Sensor Tower data. The app was designed for the “less affluent Indian consumer,” according to the Wall Street Journal, and has reached 180M downloads. In a February 2020 earnings call, CEO Sundar Pichai said that Google will be revamping its payments products globally. Google Pay’s revamp will be taking a page out of WeChat’s super-app playbook, enabling businesses to build pages and allowing users to transact without downloading new apps. This is a unique change in strategy: where others like Apple and Amazon have opted to be solely platforms at checkout, Google is trying to keep the entire flow inside its app, similar to Facebook and other Chinese internet super-apps. The difficult part will be getting merchants to sign up. India has also been a crucial testing ground for Google’s Pay strategy, and news mentions of India and Google Pay have soared in the past year. Similar to Amazon, Google announced in June it would offer loans to India-based merchants through its Google Pay for Business app later this year.



The Google Pay revamp comes on the heels of a few significant headlines that signaled a deep interest in entering financial services. Last year, the tech giant was reported to be working with Citi on checking accounts. In April 2020, it was revealed to be working on the Google Pay Card, a debit-focused spin of the Apple Card, in physical and virtual forms. Like other big tech players, Google’s fintech strategy rests on building a smart interface and allowing partner banks to handle the infrastructure. But its focus on debit and checking accounts is fairly low-margin — so Google is likely betting that it can extract insights from the data created. Its strategy with Google Pay also underscores a belief in India as a growth engine. In July, the company will announced plans to infuse $4.5B into Reliance Jio (as did Facebook), and also said it would invest $10B in India over the next 5 to 7 years.


What’s next?

Broadly speaking, tech giants already own the on-ramps to digital life. Facebook’s and Google’s sign ons, for example, are near ubiquitous across the web. Now, tech giants are well-positioned to take that experience a step further by facilitating easy payments. Tech giants seem to be taking 2 divergent approaches. Apple’s and Amazon’s strategies hinge on being presented at more merchant checkouts. Meanwhile, ad-driven players like Google and Facebook are leveraging their web properties and making the payments experience remain in-app. Future battlegrounds will likely be in banking and lending. Most players seem to be using payments as a short-term beachhead, later paving the way for added services like “buy now, pay later” lending or checking accounts. Later on, insurance and robo advising will also be within reach. Finally, an area to watch is emerging markets. In particular, Brazil and India have garnered a lot of big tech attention and resources and are likely to continue to be important test markets for new fintech products. Big tech’s success in payments depends on being able to overcome regulations both at home and abroad

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