Did Google's Search for Tighter Bonds with Banks Lead It to Porat?

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Google probably could have hired anyone it wanted to be chief financial officer. For those trying to ascertain why Google chose Ruth Porat of Morgan Stanley, her experience in banking is likely one of her key selling points.

Porat's background at one of the world's largest banks, including her knowledge of mobile payments to the increasing complexity of dealing with government regulations, could be essential to the high-tech company's efforts to respond to ApplePay, several industry analysts said.

It may be that Google hired Porat to help improve Google's relations with banks ahead of potential partnerships to retool Google Wallet, said Richard Crone, a payments industry consultant in San Carlos, Calif. One big potential opportunity for Google is to license its mobile-wallet technology as a white-label platform for banks to use under their own names.

"Ruth understands the benefits of working with banks versus competing with banks," Crone said.

"If Google was to make a move into supporting bank-branded wallets, Ruth Porat would be the one to lead such an initiative because of her heritage, connections and experience in the space," Crone said.

Google on Tuesday said Porat would succeed Patrick Pichette, the Mountain View, Calif., company's current CFO, who is retiring. Porat will join Google on May 26 and report to Google CEO Larry Page.

Porat, who ranked third on American Banker's Most Powerful Women in Finance in 2014, had been Morgan Stanley's CFO since January 2010. She's credited with helping Morgan Stanley recover from the financial crisis.

To be certain, Google has far more on its plate than just financial services. It's a major player in telecommunications with its Android smartphone platform. It's made forays into thermostats, home security and satellite imaging. Google also remains highly dependent on its core business of Internet search-based advertising. Google derived about 89% of its revenue from advertising, according to its 10-K.

Then there is the gigantic cash pile that Google has amassed. As of Dec. 31, Google held about $64.4 billion in cash, cash equivalents and marketable securities, according to its annual report. Google needs to have someone in place who can manage that excess cash, and also manage its increasingly complex finances.

Porat herself has a wide range of selling points, in addition to her stint as CFO, such as serving as an adviser to the Treasury Department regarding Fannie Mae and Freddie Mac. She also grew up in Silicon Valley and went to Stanford University.

But it is very likely that Porat's experience in banking and financial services helped set her apart from the other CFO candidates that Google considered, said Scott Petty, a partner at Dallas executive search firm Chartwell Partners who advises banks.

"Google is going to continue to expand their financial-services offerings" through their "powerful information analytics," Petty said.

Porat was not available for comment, said Becca Rutkoff, a Google spokeswoman.

Google's wide array of ventures into various industries has increasingly placed the company in the crosshairs of regulators, said Jim Van Dyke, CEO of Javelin Strategy & Research. Bank regulators, in particular, are taking a close look at nonbank companies for their role in the field, he said.

Google "wants to hire more leaders from highly regulated sectors to more effectively navigate that world," Van Dyke said.

It's the Google Wallet product that seems to offer the most potential for Porat to make an immediate impact, Crone said. PayPal's recent acquisition of Paydiant provides a good example of how such a partnership would work.

Paydiant lets customers develop their own mobile applications for payments, essentially creating a private-label mobile-payments product. PayPal acquired Paydiant in part because it sees that is where the mobile industry is heading, Crone said.

Even with a valuable brand name like Google, recent surveys have shown that consumers still would rather have their banks be the providers of mobile wallet products, not technology companies, Crone said.

"The sleeping giant in mobile payments has been the banks themselves offering bank-branded mobile wallets," Crone said. "Ruth Porat has a complete understanding of those moving parts and how to facilitate it."

Porat worked with highly complex information-technology systems during her time on Wall Street, Van Dyke said. That knowledge will help Google as it works to beef up its own technology, so it can more easily partner with financial services companies.

"The hope is that this will [help] Google outflank the likes of Apple in areas like mobile payments, identity, security [and] financial product selection," he said.

Finally, Google's hiring of Porat could prove a very wise move, Van Dyke said. It likely wants nothing to do with the complex regulatory framework that banks must navigate. Porat may have a role where she is a liaison between Google and banks, which would let Google direct its focus on technology.

"Google can stay nimble by letting the banks deal with risk management and compliance," he said.

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