Can Google leapfrog PayPal and end up a player in the financial markets?

Another "What might Google's future hold?" article.

When I do business development and marketing consulting for businesses, the factor that most often determines what the business will be doing if still successful two years hence is what is their core competency, and what internal barriers to execution are there?

With Google, they have been developing some fascinating core competencies. Take fraud detection. Building on their competency in search, they have developed an advanced and ever-changing click fraud detection system. Will they be able to apply this to their payment processing service, and will it give them an advantage vs. PayPal?

PayPal has been very unpopular during virtually all of its business life. There were a lot of online payment processors starting around the same time, and to win against competition, PayPal concentrated on simplifying it's fraud prevention and recovery. REALLY simplifying. As most people know, PayPal will freeze the accounts of anyone it suspects being even peripherally involved in fraud--meaning you don't have to do anything wrong to have your funds frozen for 6 months.

Sure enough, fraud took out the competition, and PayPal survived their users wrath. (And as far as I can tell, they're handling fraud and angry customers very little different today than they did years ago.) PayPal's core competency was in part willingness to suffer the "PayPalSucks" websites and still hang on to enough dedicated users by getting the features right and growing quickly.

Fast forward some years. Enter Google. In one of their many recent imitations of Microsoft, they are entering a market against a very successful, entrenched player. But they are internally synergistic: Google is rolling out places to spend your money AND providing the payment service. And they excel in managing and delivering features over the internet on a large scale.

But what if their fraud detection is an order of magnitude better than PayPal? Can they turn this into a decisive advantage? If so, I would say yes. A lower cost of fraud means they can lower the cost of merchant services. Then, similar to how I mentioned they might get into the finance world by automating investment, they would be in financial services. And I think they will grow in that area.

The thing about Google is, their expertise is solving problems in real-time and rapidly scaling up delivery of the solution. There has never been a company quite like them. GE's past emphasis on management best practices and execution is the closest parallel I can think of. GE had repeatedly been able to take on an incredible variety of business successfully because of this emphasis on smart execution. And I think Google does them one or two better.

So I'm still predicting that Google will be, one way or another, applying their brainpower VERY successfully in finance before the decade is out. They are working on prediction markets already. There is no more profitable place for Google's digital IQ points to be applied. Taking on PayPal successfully might end being just one more route into Global dominance in the financial markets.