Why Google, and Simple, love TxVia
Google’s announcement yesterday that it was buying a company called TxVia was a bit like Barack Obama’s announcement that he was nominating Jim Yong Kim as World Bank president: it caused a very large number of journalists to say “who?” and rush to find out what on earth TxVia was. It wasn’t easy: they were likely to find a lot of meaningless jargon about “platform as a service”. And the Google post certainly wasn’t much help.
So while we know that Google bought TxVia to beef up its Google Wallet offering, it’s less clear why TxVia would help on that front. Sean Sposito had a good attempt in American Banker, saying that Google was worried about the security of Google Wallet and that TxVia has a very secure platform. That’s true. But there’s more here than just a question of security.
Go back to one of the smartest things ever written about Google, Daniel Soar’s essay It knows in the LRB. Essentially, Google is insatiable in its desire for as much information as it can possibly get. TxVia is a company which powers roughly 100 million prepaid debit cards. And here’s the thing: the amount of data that TxVia collects from every single one of its prepaid debit cards simply dwarfs the amount of data that banks collect with normal debit cards linked directly to a bank account.
I learned this yesterday over the course of a fascinating conversation with Josh Reich and Shamir Karkal of Simple. When you open an account with Simple (if you open an account with Simple — there’s a monster waiting list, and right now it’s only working for people with iPhones, and it’s still pretty much in friends-and-family mode for the time being), the main thing you get is the Simple Visa card. And the Simple Visa card, it turns out, is actually a prepaid card built on TxVia.
Now you get a bank account too, with your name on it, insured up to $250,000 by the FDIC. Prepaid cards are clever things, but they can’t fully replace a bank account. But what they can do is provide Simple with vastly more information about transactions than any normal debit card.
The reason is basically just one of historical accident: when banks first introduced debit cards, they didn’t need any information beyond just the name of the merchant and the amount being debited, so they ignored and discarded everything else. More recently, when TxVia introduced a prepaid-card platform, data storage and manipulation was much cheaper, so they kept all the data they could find instead of throwing it away.
And more generally, prepaid-card operators think in real time, about money coming in and going out over the course of the day. Whereas banks, to this day, still batch-process most of their transactions: they accumulate a pile of them, and then put them all through at the end of the day. That transaction-oriented mindset makes gathering rich data — even really basic stuff like the zip code of the merchant — something no bank is set up to do.
At Simple, they’re taking the steps which have already been made by TxVia with its prepaid operators, and adding lots of custom special sauce on top, mostly around the mobile-banking functionality in their iPhone and Android apps. What’s more, the Simple card is in an important sense not a prepaid card: your account balance always remains in the bank, rather than on the card, and the card itself always has a zero balance. In that respect, it’s a bit like an old-fashioned American Express charge card, which gets paid off daily rather than monthly. And because all Simple customers will have gone through the process of opening a bank account, which is a lot more laborious than simply buying a prepaid debit card, Simple knows those customers well and can allow them to spend much more money on their cards than most prepaid cards allow.
What I’m not clear on is how much of the information about my Simple transactions will now be available to Google, if only in some kind of aggregated and anonymized form. It’s possible that if I somehow link my Simple account to my Google account — or if, as is certainly possible, Google ends up buying Simple — then Google will have access to a very great deal of my very private financial information. That could allow it to provide me with incredibly well personalized services — and would almost certainly cause a firestorm from privacy advocates at the same time.
But for the time being, I want my bank to know lots of information about me, because that enables the sophisticated and data-rich applications that Simple is rolling out. The difference between private banking and the service that the rest of us get is, at heart, simply personalization. If Simple, TxVia, and Google can provide that kind of personalization on a mass scale, that’s surely something to welcome.