Google has a very global business model. How is the company providing a localised buying experience for customers using Google’s e-commerce channels, wherever possible?
Each country has its own unique set of payment characteristics. For example, credit card payments are very popular in the US, but not as popular in Singapore (where electronic funds transfers are used more frequently). This is where the banks and treasury’s experience in payments can really help the business identify attractive (and cost effective) payment alternatives.
We have worked extremely hard to ensure that users of our e-commerce channels, such as Google Play, have access to multiple forms of payment (FOPs). These include electronic transfers, local and international credit cards, carrier billing and gift cards. We do this by working with our local team members who are on the ground in-country and know what FOPs are used for e-commerce transactions in their domestic market(s). If there is a unique payment type in a particular country that has high volume, we will work to add that to our infrastructure.
It’s all about giving customers choice and making it easy for them to transact with us. Ultimately, payment mechanisms are key to the success of the e-commerce space, purely because of the different types of customers. If you have a single form of payment, you will be limiting yourself and your customer base. We also have local invoicing capability, and a bank account structure that allows us to accept over 50 currencies.
Could you give an example of how the company has adapted its FOPs to suit local market practices?
Rolling out Google Play is a perfect example of this. Google Play is an online marketplace for developers all around the world to sell their software and games to buyers across the globe. For this to be successful, the treasury team here at Google works with our product management and engineering teams to give customers a mechanism to pay for the software that they purchase, as well as put in place payment mechanisms to disburse to the developers.
Given the nature of this business, where buyers consume the products they purchase almost instantaneously, not all forms of payment work – cash, for example, is not appropriate. However, some countries are predominantly cash societies. And given the issue about penetration of other forms of payments, such as wire transfers, credit and debit cards and stored value products like Google Wallet or PayPal, we needed to come up with something new and innovative to address that.
Given the usage of GPRS-enabled phones, in some markets even a payment solution on a mobile phone network infrastructure is the best way to reach the majority of the population with a consumer internet product.
How can partners, such as banks, help Google to better understand local market practices when evaluating a particular form of payment?
Banks are key partners when evaluating the various forms of payment that Google might need to support in a particular country or region. They have ‘feet on the ground’ and are up-to-speed on local payments and developments in-country, such as Faster Payments initiatives. Of course there are non-bank partners and solutions available as well, so banks aren’t the only source, but they are certainly a good data reference point.
What other challenges does Google face from the point of view of supporting customer payments? Are there any differences in customer buying behaviour which have an impact on treasury, for example?
One of the biggest challenges Google has in supporting payments is customer composition. Our customers vary from large corporations to small and medium-sized businesses as well as individual/sole proprietors. Each one of these businesses prefers a different type of payment experience. For example, a large customer is most likely using purchase orders (POs), and wants to make an electronic funds transfer (EFT), since this is the lowest cost payment method.
A small to medium-sized business might also want to use EFT, but they also might use a purchasing card (P-card). For individuals, it can be a combination of bank payments and credit cards. Treasury’s preference is obviously to drive cost out of the network and to improve timing certainty.
How then has Google treasury tackled these challenges?
One of Google’s flagship projects in this space has been our virtual accounts solution. This great solution (see the case study opposite for more details) creates a unique bank account number for each customer paying Google. It allows Google to quickly identify the sender of cash and purpose, which then allows us to support our customers more quickly. We first implemented it in Japan, looking to get a timelier and better reconciliation match for inbound customer payments. This involved partnering with both Citi and our internal technology team.
Elsewhere, to further drive efficiency, Google has also standardised its global invoicing process and payment formats.
What benefits has format standardisation delivered to the treasury function?
Standardising payment formats has been a great solution. We do have a global invoicing group that drives consistency in invoice delivery, but the payment formatting was absolutely key as it allows us to match our cash much more quickly.
As most treasurers will understand, the biggest challenge with cash application is missing data. Sometimes this comes from the recipient, but other times it’s due to correspondent banks cutting off data as the payment moves through the banking system. Payment formatting has helped us track the key data needed to identify the sender of the cash, and the purpose of the cash.
Do you have plans to further optimise these solutions or to take digitisation and e-commerce to the next level with more new solutions?
Google’s innovative culture keeps us inspired to always look to improve existing solutions. We are constantly working with our business partners to keep on top of their needs by offering local payment solutions. We take the ‘treasury lens’ of what is happening in the cash space and translate that into potential solutions. So yes, I’m sure there will be plenty of new solutions to talk about going forward.
Finally, for those treasurers wondering about exploring innovative digital or e-commerce solutions, but not yet quite sure, what would your words of encouragement be?
Don’t be afraid to dive in and explore the waters. Your existing knowledge of the payment space, how regulators look at payments and cross-border transactions will help you look at the various alternatives.