Google Payment Corp., the internet giant’s payment business, was placed under federal supervision by the US consumer finance agency on Friday.
TakeAway Points:
- The US watchdog for consumer finance on Friday announced it was ordering federal supervision of Google Payment Corp., the internet giant’s payment arm, a decision the company immediately said it was challenging in court.
- According to the CFPB, consumer complaints indicated Google Payment had failed to investigate complaints about erroneous transfers, among other potential violations, and that the law allowed for supervision even if Google has discontinued the services in question.
- Okta shares popped in extended trading Tuesday after the company reported third-quarter results that beat Wall Street’s estimates.
Google payment is under supervision
Google quickly declared it was contesting the ruling in court. On Friday, the US consumer finance watchdog announced it was imposing federal oversight on Google Payment Corp., the internet behemoth’s payment division.
The Consumer Financial Protection Bureau announced the step, saying it had determined services offered by Google Payment had posed a risk to consumers.
The regulator’s step and the subsequent lawsuit marked a government tussle with a Silicon Valley behemoth in the final weeks of President Joe Biden’s administration. The regulator’s move could be reversed after President-elect Donald Trump returns to the White House in January.
Under Biden, the CFPB has been more closely scrutinizing the growing sector of financial services provided by Silicon Valley rather than traditional banks.
The agency cited nearly 300 consumer complaints, many of which concerned reports of fraud, scams, and unauthorized transactions. It said it did constitute a finding that the company had engaged in wrongdoing.
Failed complaint investigations
The CFPB order nevertheless said consumer complaints indicated Google Payment had failed to investigate complaints about erroneous transfers, among other potential violations, and that the law allowed for supervision even if Google has discontinued the services in question.
In a lawsuit filed after the CFPB announcement, Google Payment Corp. said the regulator had relied on a small number of unsubstantiated complaints concerning a product it no longer offered.
“As a matter of common sense, a product that no longer exists is incapable of posing such risk,” the company’s complaint said.
Financial regulators use confidential supervisory exams to spot and correct companies’ violations of law.
Last month, the CFPB finalized new regulations subjecting tech companies to the same supervision currently faced by banks if those companies offer digital wallets and payment services.
The agency has also persisted in rulemaking in the final weeks of Biden’s administration, despite calls from Republican lawmakers to desist.
Okta shares pop 18% on earnings beat
Shares of Okta popped more than 18% in extended trading Tuesday after the identity management company released third-quarter results that beat analysts’ estimates and offered rosy guidance.
Earnings per share 67 cents adjusted vs. 58 cents expected by LSEG, while revenue $665 million vs. $650 million expected by LSEG.
Okta helps companies manage employees’ access to applications or devices with features such as single sign-on and multifactor authentication. The company swung to profitability, reporting net income of $16 million, or 9 cents per share, during the quarter, compared with a net loss of $81 million, or 49 cents per share, in the same period last year.
Revenue increased 14% from $569 million a year ago, according to a release. The company reported $651 million in subscription revenue for the quarter, beating the $635 million average analyst estimate, according to Street Account.
“Our solid Q3 results were underpinned by continued strong profitability and cash flow,” Okta CEO Todd McKinnon said in a statement. “The focused investments we’ve made in our partner ecosystem, the public sector vertical, and large customers are materializing in our business with each of these areas contributing meaningfully to top-line growth.”
For the fourth quarter, Okta said it expects to report revenue between $667 million and $669 million, topping the $651 million average estimate, according to LSEG. The company expects to report earnings of 73 cents to 74 cents per share for the period, which also exceeded estimates.
Prior to the close, Okta shares were down 10% for the year, while the Nasdaq is up 30% over that stretch.
Okta will host its quarterly call with investors at 5 p.m. ET.
