Google has signalled the potential expansion of its new credit card offering in Australia in the opening salvo of an offensive against the financial services industry.
Last week the technology giant used its huge cash reserves to launch its first credit card in the US and the UK – AdWords Business Credit.
The pilot project, which is supported by Barclays Bank and Mastercard in the UK, is seen as a small but important step towards taking on the traditional banks on their own turf.
But Google Australia told The Australian Financial Review the US and UK were just the beginning.
"The US and UK are not the only countries where our advertisers face limited access to credit," he said. "Google is interested in using its financial resources to help advertisers with access to ample credit at attractive rates wherever possible."
Innovation wave two
According to a report by the Financial Times, businesses can borrow up to $US100,000 a month to pay for Google Adwords, the world's biggest internet advertising system.
The interest rates of 8.99 per cent in the US and 11.9 per cent in the UK are lower than most other credit cards.
Capgemini financial services head René Borghgraef said the move did not represent new technology but was a significant step into financial services for a company that was born as a internet search engine.
"I think this is definitely part of what we call the 'innovation wave two'," he said. "The front-end customer-facing space . . . is where [Google] is changing the market dramatically.
"I think this is probably a first step for Google . . . and while this is a business-to-business offering, it will probably bring this into the consumer market as well."
tech firms next big threat
The move by the tech giant to offer traditional banking services is further confirmation of warnings by analysts and banking chiefs around the world about the rising threat of technology companies in the traditional banking space.
Commonwealth Bank's Ian Narev told The Australian Financial Review in June that multinational tech firms such as Google and Facebook were the next big threats.
"Regardless of the names, whether it be Google or Facebook, the principle is the same: they have very high technology capabilities, very strong brand appeal, low legacy challenges. I consider that to be a real challenge," he said.
MWE Consulting director Mike Ebstein, who was previously general manager of ANZ's cards division, said Australia's credit-card market was unattractive to new entrants but added Google could win major market share in the mid-term.
"Virgin demonstrated six years ago that the combination of a powerful brand and strong value proposition can work, so yes [Google] could do it," he said.
"Over time as Gen Y and Gen X mature and we increasingly move with technology, the power of the banks will be relatively diminished."
apple's banking ability
Consult Hyperion director David Birch has worked with Google and various payment schemes around the world.
He said Apple had the world's biggest credit-card database and could easily become a powerful player if it applied its abilities to banking.
"Apple has a very good record of coming up with easier and better ways of doing things," he said.
"People might complain about iTunes and how the music isn't theirs but they all use it because it's easy.
"If they can use Apple Passbook to bring that degree of simplicity and ease to messing around with all my store loyalty cards and messing around with my coupons or boarding passes, then I'll use it."
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