Google has announced that their Mobile payment system Google Wallet will be insured by the FDIC.
Mobile payment systems have failed across the boards to take off in terms of popularity, and this is likely due to some instilled fears that the systems are not safe. This announcement from Google, initially released via Yahoo news, is an interesting approach to adding a layer of security to their payment system. The Federal Deposit Insurance Corporation is a United States government corporation that insures the bank accounts of member banks for a maximum of $250,000.
Those familiar with mobile payment may be asking themselves what this has to do with anything. Just as with Paypal and Venmo, Google Wallet is meant to be a system for the movement of finances with ambitions that customers will leave some of that money there. A user, in other words, can treat a Google Wallet account as something of a bank account if they so desire. Google Wallet, however, is not a bank and thus are not legally obliged to be insured. Google has opted for the insurance regardless.
But will this do anything to increase the amount of users who will adopt the Mobile Payment System? It seems unlikely. As is the case with PayPal, most users do not see the service as a convenient way to house money, but simply as a way to transfer money from one point to another. While insuring money housed there (as PayPal did prior to 2012) may certainly be a relief for some, it does little to incentivize users to the service over traditional banks (specifically, it gives you no interest rates). What is worse, this move seems to be a solution to a non-problem: a company as large as google will not sink overnight, and one imagines that should Google ever have to file for Chapter 11, users will be well aware of it beforehand.
