Google and Facebook, the two among the most popular technology mega-companies, with billions of users around the world, are expanding their business into the field of finance. They started with mobile applications for payment using smartphones, and the latest information shows that their goal is a banking system platform with user accounts, payment, and credit cards. Let’s look at what has been done so far in that field, and what is planned for the near future.[no_toc]
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Google Wallet + Android Pay = Google Pay
In mid-November 2019, Google joined the efforts of some of the largest IT companies in the world (including No.1 by many surveys – Apple) that tried to break into the banking area by offering their users bank accounts and credit cards. The idea is that users access their current accounts through Google’s digital wallet Google Pay.
The story began in late May 2011, when Google introduced a contactless payment system Google Wallet. It was developed in collaboration with Mastercard and allowed users to pay bills at store cash registers using a mobile phone with a built-in NFC (Near-field Communications) chip.
Four years later, a new platform was launched – Android Pay for payment with mobile devices with the Android operating system (mobile phones, tablets, smartwatches). After launch, the service was compatible with 70 percent of Android devices and was accepted by more than 700,000 retailers.
In early January 2018, the services Google Wallet and Android Pay are integrated into a single payment system called Google Pay. It’s this platform that forms the basis of Google’s future banking system.
Smart Authentication
Google Pay uses NFC technology to transfer card information. The chip is built into the contactless card and the device to which the card approaches during the transaction contains a reader. In order to pay at points of sale (POS), users need to bring their mobile devices close to the POS system.
Google Pay has smart authentication that allows the system to detect when a device is considered secure. For example, a screen lock is required on the user’s phone and the system can detect if the phone has been unlocked in the last five minutes. With a payment (transaction), Google Pay doesn’t send the user’s credit or debit card number. Instead, it generates a virtual account number. A one-time security code is sent instead of the card number or user details.
This contactless swiping actually uses two-factor authentication. It allows Android devices to communicate wirelessly with POS sales systems using an NFC antenna, Host-based Card Emulation (HCE), and Android protection. HCE is a software architecture that provides an accurate virtual display of various electronic identity cards (access, transit, and banking) using only software.
Prior to the use of the HCE architecture, NFC transactions were mostly performed using hardware secure elements. HCE provides mobile applications with a solution for payment cards and access cards using cryptographic processes traditionally used by hardware-based security systems, but without the need for real physical hardware security elements. In doing so, it offers payroll card distribution in real-time and allows easy implementation in the field, that is, doesn’t require software changes within the payment terminals.
Improved Functionality
Compared to previous Google payment apps (Google Wallet and Android Pay), Google Pay brings new functionality. To activate the service, you need to download the application from the Google Play Store, which is free. Users can add their payment cards by taking photos of them or entering card details manually. The application offers a list of nearby stores in which can be paid via Google Pay and the Cards Tab option gives the user a view of all his cards, loyalty programs, gift cards…
Google Pay application will be able to be used on Android devices from different manufacturers (Acer, Huawei, Samsung, LG, Motorola …), at points of sale that support this type of payment, as well as for the transfer of money among users. There are no restrictions on the amount of the transaction. In May 2018, the application also received support for the purchase of airline tickets, as well as tickets for cultural and sporting events.
Google has taken a number of steps to expand the scope of its application and ensure that Google Pay reaches new sites, stores, and other locations. The information that Google Pay was implemented in the Curve banking platform at the beginning of November speaks in favor of further progress and expansion. It’s a London-based banking platform that combines all customer cards into one. The availability of Google Pay is thus expanded among users whose banks don’t currently support Google’s digital wallet.
The service is currently only available for Android smartphones. In the future, as announced by Google, it will be extended to other mobile platforms and phones, such as iPhone. However, there’s a big hurdle that Google will have to overcome in order for its banking services to be widely accepted among consumers – it will have to convince them that their personal data is completely secure in all these transactions.
Facebook Libra
Facebook is also struggling to break into the area of finance. These activities started with the establishment of the international cryptocurrency Libra, which was technically launched in June 2019, and whose official launch is planned for 2020. The idea is, as with other cryptocurrencies, buying and selling without the need to have a bank account or credit card.
Facebook aims for Libra to be a stable digital cryptocurrency backed by reserves of real funds, including bank deposits and securities, to ensure that Libra’s value doesn’t change as drastically as Bitcoin’s value has changed. To create a simple global currency and financial infrastructure that can be used by billions of people, Facebook counted on corporate partners (including Uber, Spotify, PayPal, Visa, Mastercard, etc.), each of which had to invest $ 10 million.
There are some industries that adopt cryptocurrencies for payments more rapidly than others. One of them is web hosting. By its nature, cryptocurrencies can be used for anonymous or low-cost transactions. Website owners can use them, especially Bitcoin, to purchase web hosting services. Considering how highly the web hosting user-base values its anonymity for security purposes, there’s no surprise that this industry is so keen on accepting cryptocurrencies.
On the web hosting market, there are providers known as valuing the utmost privacy. Each of their plans and packages come with databases based on MySQL. This means that they favor hosting services with MySQL database, such as MySQL hosting. In addition to the MySQL database, these services offer unlimited email accounts, subdomains, and FTP accounts. MySQL hosting is a part of a group of few more hosting servers that these privacy-based providers sell: dedicated servers, high-performance SSD-powered VPS, and shared hosting services.
For now, it seems that Facebook’s plans regarding Libra will largely fail. Libra has experienced numerous criticisms around the world, and a large number of partners and investors (out of a total of 28) have already given up on the project. Namely, in October 2019, PayPal withdrew from the Libra Association. Visa, MasterCard, Stripe, and eBay also left. Their withdrawal followed a backlash from a number of governments around the world. The fact that customers have largely lost trust in the company after many privacy breaches, scandals, and abuses should be added to this.
Before Libra becomes generally accepted, people must be convinced of two things. First, they need to have enough trust in Facebook to hand over their money. Another thing concerns the regulation of currency by officials. It will probably happen soon that it will be valid in the USA, but that doesn’t mean that other countries around the world will welcome it with open arms. It should also be mentioned that, at this moment, Trump and his administration are launching an initiative to disband the technology mega-corporations (Big Tech), which includes Facebook.
Facebook Pay
Facebook, despite all the problems, isn’t giving up but continues with the introduction of Libra and banking activities. At the same time as Google’s banking platform was announced, in November 2019, Facebook Pay was also introduced. It’s a system that will allow users to pay via Facebook, Messenger, Instagram, and WhatsApp. These applications are already used for purchases, fundraising, and money transfers, but Facebook Pay should make this easier and, at the same time, increase data security and protection.
In this way, data on the method of payment will be entered only once (there’s no need to repeat this for each transaction). Facebook Pay will be able to connect to other payment apps (in stores) and automatically activate when needed. Users will be given the ability to set on which applications this system will be active (data won’t be automatically inserted on all applications). Users will also be offered payment history data, as well as real-time (chat) support.
All major credit and debit cards, as well as PayPal, are supported by Facebook Pay. It’s independent of the Calibra wallet (digital wallet for the Libra network). For now, it’s active in the United States (via Facebook and Messenger), with support for collecting donations, buying games, buying tickets for various events, and paying between users. The application can also be used within the Facebook Marketplace.
Outside of America, the system has been tested in India and will soon be performed in other parts of the world, as well as the possibility of performing user transactions via Instagram and WhatsApp. During the presentation, guaranteed security was emphasized because, as they point out from Facebook, the system will be regularly scanned in order to detect and prevent any possible abuse.
