Traditionally, the acquisition of a prepaidprocessor is driven by the cost savings associated with verticalintegration. For example, Green Dot can justify the acquisition ofa processing platform based on the cost savings associated with itsexisting prepaid volume. The transaction volume associated withGoogle Wallet is likely years away from delivering profitabilitybased on a pure vertical integration strategy, so what is the payoff for Google with the acquisition of TxVia?
Google’s primary mission is to collect, distill, analyze, andmonetize (through advertising) data, but collecting data has drivenGoogle closer and closer to payment processing with GoogleCheckout, a cloud-based payment method for e-commerce merchants,Google Shopping that aggregates catalogs and provides pricecomparisons from e-commerce and local merchants, and of courseGoogle Offers, its daily deal product. So perhaps TxVia is simply alogical extension of Google’s existing product set in that theprepaid processing platform enables the wallet to pay for productsand provides Google greater access to payments related data.
By owning the processing platform Google has the opportunity tocollect additional levels of detail about Google Wallet ownerpurchase behavior. The purchasing data could enable Google to”close the loop.” Instead of waiting for a merchant to report backto Google on who purchased a deal, and then trying to link thatinformation back to the user of the mobile handset, Google may beable to see the actual purchase transaction when it happens. Sinceit is well known that the highest impact is achieved if an offer ismade during the transaction, this approach might deliver criticalinformation back to Google in close to real time. Not only does”Big Data” get bigger, it also becomes more actionable in realtime.
Another possibility is that Google may have recognized theopportunity to work with one of the existing TxVia programmanagers, two of which represent a good opportunity. First there isIntelispend, a division of Maritz, which owns a patent associatedwith Restricted Authorization Networks. This patent enables a cardto be locked down so that it can only be accepted at one store, onemerchant, or perhaps just a few specific merchants, but it operateson one of the Visa, MasterCard or Discover networks, acceptingmerchants do not need to make changes to their POS terminals. Infact, the control can be exerted down to date and time or even tothe dollar value to be authorized. Using this technology withGoogle Offers would enable the offer to be made and acceptedwithout the merchant being required to install any special softwareor hardware – the offer could be transacted over the existingbranded networks. So perhaps Google has already aligned itself withMaritz and Intelispend to leverage this technology, which isalready baked into the TxVia platform.
Or perhaps Google has partnered with Blackhawk Network, anothercompany already operating on a licensed version of the TxViaplatform. Blackhawk is one of the largest prepaid mall distributorsand has relationships with major merchants for both issuing andselling gift cards. If Google can convince Blackhawk to support allof Google’s initiatives, it would solve a large hole in Google’sgo-to-market strategy; a direct channel to merchants with a partnerthat is excellent at selling Business-to-Business solutions.
The last thing Google, or TxVia, needs right now is for all of thecurrent program managers on the TxVia platform to start planningtheir portfolio migration. The strategies described above wouldhelp TxVia keep the transactions it has today, while aligning theTxVia business partners with the goals of Google. But this won’t beeasy and only time will tell what Google’s real plan is and howlong it will be before Google sees a return on its investment inTxVia.
