Google Wallet and mobile payment systems are becoming commonplace, but it is actually one of the least interesting financial or banking services Google has invested in.
The Underbanked
The term "Underbanked" describes people in the US and abroad who do not rely on banks or credit unions for financial transactions, or exclude themselves entirely from using plastic for purchases. This is important, especially in countries that lack a proper banking system, because financial footprints are crucial in the digital economy. Those without a history of finances can find themselves running into credit issues or being rejected for loans.
The lack of knowledge about or access to the financial system has led to a large number of people worldwide not fully participating in their own economy. Google is looking to change that.
InVenture was created in response to rural emerging markets that lacked “proof of creditworthiness.” The mobile banking system works by providing “real-time” credit scores by monitoring the daily cash flow and spending habits of an individual. The personal finance start-up is mostly utilized in Africa to assist in giving those in extreme poverty an economic footprint.
Many have seen the cheesy Credit Karma commercials touting its free credit checks and monitoring, but what few know is that Google Capital worked with others in unloading $85 million to the website. What stands out about Credit Karma is that, while many “free” credit check sites require users to sign up with a credit card (only to later charge a subscription fee if users don’t opt-out), Credit Karma does not require people to input any banking information for full access to credit reports.
Digit is a company that wants you to save without having to change your spending habits. Once an individual provides access to bank accounts, the service uses algorithms to learn a person’s payment and spending habits and transfers disposable income into a non-interest savings account, all on its own.
Robinhood is looking to make stocks a little less scary by democratizing access to the financial markets. By keeping down overhead cost, the zero-fee stock trading company is able to attract a younger, less wealthy audience by allowing smaller trades without brokerage fees eating away at profits. The company is experimenting with premium accounts for revenue and collects interest on margin trading, which allows investors to borrow from the brokerage firm at a rate of 5 percent.
The Bitcoin economy?
Google has also dabbled in the budding digital economy of Bitcoin (BTC).
Bitcoin is a digital currency that exists without any government or bank overseeing it. Bitcoin prices have had their ups and downs, and some question if the world is even ready for a mainstream version, but companies such as Google appear to be prepping for a new kind of world economy.
Buttercoin – a start-up aiming to make the new currency more accessible, with a focus on the American business sector – is creating a user-friendly experience for buying and trading Bitcoins. The home page features a calculator that gauges the value of a currency into Bitcoins. However, it appears the experiment has failed, as Team Buttercoin announced the service was closing via Reddit on April 10 due to lack of funding.
While Bitcoin has been referred to as the “Wild West” of finance, LedgerX is looking to tame the new frontier. The start-up wants to be the first federally regulated Bitcoin exchange in America and has been waiting for approval from the US Commodity Futures Trading Commission since September 2014. LedgerX is gaining support and, if approved, could open the floodgates of the Bitcoin market in America as a more mainstream form of currency.
Ripple Labs, is looking to change the international Bitcoin game. The company created its own version of Bitcoin, known as XRP, which “is intended to make many foreign exchange transfers faster and less expensive.” The open source protocol “interconnects the world’s disparate financial systems to enable secure and instant payments in any currency.” As MIT’s Technology Review put it, “It’s a moneymaking scheme a child might suggest: get rich by inventing a new form of money” but Ripple Labs “is getting other people to play along....”
