Google Wallet is making a significant change in how it handles funds, in the latest of a series of moves that gives Google a stronger footing against Apple Pay's rising tide.
Google will place its consumer funds-on-deposit into FDIC-protected bank accounts, according to a report in Yahoo Finance. Though the benefits to most consumers will be minor Google Wallet typically draws funds from users' credit and debit cards, rather than asking them to fund a stored balance the change is one of many steps Google is taking to transform consumers' perception of its mobile wallet from a nifty tech gimmick to a trustworthy bank product.
Google Wallet has already changed drastically since its debut in 2011, adding features and removing hurdles to adoption by banks, merchants and consumers. When Apple Pay launched last year with an emphasis on security and bank partnerships, it raised the bar for what consumers expect from a mobile wallet, and Google is responding aggressively.
In addition to adding FDIC insurance, Google entered a pact with AT&T, Verizon Wireless and T-Mobile to pre-install its mobile wallet on the Android phones they sell. Google also took over the assets of the carriers' failed Softcard wallet app, which now directs users to enroll with Google Wallet.
Google is also improving its relationships with merchants, as demonstrated by the company's recent pact with Shopify. It is also reportedly planning an online bill pay system called Pony Express, which would integrate with Google Wallet and Gmail.
All of these additions bring Google Wallet up to speed with certain features of Apple Pay and, in some cases, add tools, security and relationships that Apple does not have. In the example of FDIC insurance, Google adds a feature commonly associated with bank accounts, providing an added perception of security without having to change the capabilities of the wallet app itself. Apple Pay does not store funds, so it cannot offer FDIC insurance.
Google communications manager Anaik Weid confirmed the addition of FDIC coverage, but would not elaborate. FDIC spokesperson LaJuan Williams-Young would not comment on the Google arrangement specifically, but said it is possible for an entity to have multiple bank accounts with the $250,000 limit applied to each one. She stressed that the FDIC would provide protection only if the bank where the funds are deposited goes under; anything happening to the account holder wouldn't be covered.
The funds at issue are monies left within the Wallet Balance, which can be used for person-to-person payments or to make purchases from Google-owned properties such as the Google Play app store. Wallet Balance funds can also be spent at MasterCard merchants by those who have a Google Wallet debit card.
Google is following the same path American Express did for its Bluebird prepaid card, which it developed with Walmart. In 2013, Amex added FDIC insurance, a higher balance limit and the option to use paper checks. The goal, in that case, was to take the already successful Bluebird card and make it a more serious alternative to bank accounts.
If financial trust is the goal, there are few better monikers than the FDIC. The path to mobile payment dominance starts with consumer trust and then getting those consumers to pour an increasing percentage of transactions through Google Wallet and, eventually, to start using it as a single-stop for all financial transactions.
In this limited context, Google Wallet and Apple Pay are on the same path. Both Apple and Google are doing everything they can to get more consumers comfortable with mobile payments. To succeed, a mobile wallet needs a long-term commitment from the consumer, and to achieve that, it must appear as secure as a bank account, if not more so.