[ad_1]
Alphabetis (NASDAQ: GOOG) (NASDAQ: GOOGL) Google recently rolled out a major redesign for its Google Pay app on Android and iOS, and at least one analyst thinks the update could threaten Square (NYSE: SQ) and PayPal (NASDAQ: PYPL).
However, I think Square and PayPal probably won’t lose much sleep over Google’s latest efforts. Let’s take a look at the evolution of Google Pay, why it’s drawing more attention now, and why it probably can’t hurt Square or PayPal yet.
Image source: Getty Images.
Google Pay growth tracking
Google Pay started as Android Pay, a basic replacement for credit cards, in 2015. But in 2018, Google merged Android Pay with its mobile wallet, Google Wallet, to create Google Pay, which also offered deeper integration with credit card apps. third parties. and websites.
The latest redesign adds new personal finance tools, which allow users to link the app to their bank accounts, track their spending habits, search for past transactions, apply online discounts to purchases, and more. It also expanded its support for contactless payments at gas stations and added integrated payments for parking fees in select cities.
Google Pay currently serves about 150 million users in 30 countries. That gives it five times the reach of Square’s Cash app, but it’s still dwarfed by the 361 million active PayPal accounts.
Why are analysts raising red flags?
Piper sandler (NYSE: PIPR) Analyst Christopher Donat recently called the new Google Pay app a “threat” to Square and PayPal. Donat primarily cited the rise of Google Pay on app store listings as evidence of that growth.
Donat also noted that Square’s Cash app downloads had slowed from nearly 80% year-on-year growth in April to about 12% in December. He stated that PayPal’s recent Mobile Cash app downloads were largely driven by its recent addition of cryptocurrency purchases.
Why App Store Ratings Can Be Misleading
At first glance, it certainly seems like a lot of people are downloading Google Pay. According to Sensor Tower, Google Pay is currently the top finance app on Google Play and the twelfth most popular finance app on Appleis (NASDAQ: AAPL) App store.
However, Android users already use Google Pay to process payments in their Play Store, so it’s not surprising that Android version downloads temporarily spiked after the latest update. Additionally, Google recently announced that it would phase out web-based payments in early 2021, forcing those users to download the app.
Apple’s App Store rankings tell a different story. Google Pay briefly became the top finance app on the App Store in mid-December, according to Sensor Tower, but dropped out of the top 10 by the end of the month. As of this writing, Square’s Cash app ranks first again, followed by PayPal’s Mobile Cash, IRS app, and Venmo.
That steep drop indicates that the “new” Google Pay doesn’t have as much staying power, and its ranking on Google Play could follow the same trajectory once the initial interest wears off.
Why Square and PayPal aren’t worried
Google Pay seems to serve many users around the world, but many of those payments likely originate from the Play Store rather than third-party stores and apps.
According to McKinsey’s 2019 Digital Payments Survey, Google Pay is not one of the top three methods for in-app payments, online payments, or peer-to-peer payments. The only method it gained foothold was in-store payments, where it still lags far behind Apple Pay.
Source: McKinsey.
PayPal likely stayed well ahead of Google during 2020. PayPal’s total payment volume increased 36% year-over-year in constant currency terms last quarter, marking its strongest growth rate to date.
Meanwhile, Square’s Cash app was ahead of PayPal’s Venmo, its main rival in peer-to-peer payments, in total downloads last year, according to Nomura Instinet. Square’s Cash app reached 30 million active users last June, up from 24 million at the end of 2019. PayPal stated that Venmo had 52 million active users at the beginning of 2020.
Millennial and Gen Z users also generally prefer Venmo and Cash App, respectively, over other payment apps. Venmo became a popular way for millennials to split checks while dining out, while Cash’s expanding ecosystem of fintech services made it easy for Gen Z users to not only send money, but also buy bitcoin and execute transactions. of free shares.
By comparison, Google Pay faces two major challenges. First, its Google brand raises privacy concerns right away, even though the tech giant says a user’s financial data will not be sold to third parties or used for targeted advertising.
Second, Google has a long history of overpromising, underdelivery, and then abruptly abandoning its new apps. The new Google Pay sounds groundbreaking, but your interest in improving the app could wane rapidly as users stick with Square and PayPal for online and peer-to-peer payments.
The bottom line
Google launched Google Play more than five years ago. But in the past five years, Square’s shares have risen 1,630% while PayPal’s shares have risen more than 530%.
Both fintech companies dazzled investors with their strong growth rates and forward-thinking expansion strategies. Those trends won’t end any time soon, and I don’t think Google’s latest efforts will derail either company.
[ad_2]
