Google muscles into credit card market

23rd July 2011  

Google credit card

As you search out your bucket and spade this weekend in preparation for the annual August holiday exodus, spare a thought for our ‘High Street’ Bankers, that much maligned race who never seem to be able to do anything right.

Just when they thought they had more than enough to worry about with the continual barrage of negative press over their shaky finances, the PPI mis-selling scandal (read our comprehensive PPI Mis-selling Guide) and the current miserly returns for savers, here’s some news that will really have them weeping into their ice-cold Sancerre over the holidays.

Cardchoices has reported before about the rise and rise of the supermarket banks with Sainsburys and the Tesco Credit Card rapidly gaining market share. But the news that Google is entering the credit card market with its own branded card will really send a shock wave through the retail banking sector.

As ever when Google enters a new area of business, the messages surrounding the activities of the world’s best known company are cleverly managed to try to minimise panic amongst the established players in the market. But however you chose to interpret it, this as they say is the thin edge of the wedge.

The new Google credit card is appearing first in America framed as a ‘vendor financing’ product being offered to Google Adwords customers to enable them to easily finance their online ‘Pay Per Click’ (PPC) advertising campaigns. Google makes 96% of its money from this form of online advertising. Small companies, say Google, are having trouble raising loans to finance growing their businesses, so it wants to give them a helping hand.

The new Google card will have an interest rate of 8.99% which Google says will be the long term rate, not just an introductory one. Credit limits like most other cards in the market will be ‘subject to status’ and the credit information on file for the applicant. Google will also have the previous track record of the advertiser on file from their Adwords account to assist in decision making.

Google clearly has the funds to ‘sponsor’ the advertising budgets of the future Google card holders, at the end of June it had close to $40 billion (£25 billion) of marketable securities and cash on its balance sheet. If a small business is already carrying a balance on the credit card it uses to fund its Google advertising it’s likely to be paying the market average interest rate of around 18.5%; you can see therefore that to many the new Google credit card will be a no-brainer. Its not yet clear whether holders of the new MasterCard branded Google credit card will be able to use their new cards for purchases outside Google Adwords, but its seems likely that it will be accepted anywhere other mainstream MasterCards are.

Our intelligence suggests that Google is working with World Financial Capital Bank to offer what’s said to be a “beta” version of the AdWords Business MasterCard. The card will be offered to a randomly selected, but statistically significant group of US based Google advertisers initially. Invitations for existing Adwords customers selected for the trial will be sent out on Wednesday.

Other significant online businesses like Amazon have offered credit cards for some time, but the move is thought to be initially linked with the increasingly competitive market in paid online advertising. Google has seen significant competition this year from Social Networks like Facebook and from the new sponsored search partnership between Microsoft and Yahoo.

However the project will give Google a neatly packaged, easily managed and comparatively low risk entry into the credit card market. Things will never be the same again.


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