Google checking in, Banks say 'Welcome aboard'!

Google’s announcement earlier this month of launching a checking account in partnership with leading banks isn’t really a surprising one. The tech major has been planning its foray into banking and had initially partnered with Citigroup and Stanford Federal Credit Union late last year. The latest development however expands that partnership to include 13 more banks and credit unions – indicating Google’s heightened ambitions to offer diversified financial services.

While the details around the product such as features, pricing etc are still not clear, press reports reveal Google will focus primarily on the front-end experience and offer “financial insights”, while the banks will take care of the financial plumbing, compliance and security aspects.

For banks, the partnership would likely mean access to a wider user base at a lower acquisition cost made possible by Google-powered user interface (UI). With branch banking model shifting towards technology-enabled interactive solution centres and service hubs, and the pandemic further exacerbating this trend towards appointment-based and drive-thru banking, main street banks are scrambling for avenues and channels for expanding customer base. And more importantly, to retain their existing customers – a lot of whom from switching out to digital-only challengers. And therefore, the access to Google’s marketing and technology expertise is a proposition, just too big for banks to pass up.

Second is the ability to offer rich and personalized financial insights, contextual real-time offers, budgeting & personal financial management (PFM) tools and superior rewards program by leveraging Google’s location, search and browsing data. Increasingly, we are seeing that UI or the app itself being perceived more important than the product, offering big tech like Google a distinct edge vis-à-vis bank brands. Third and perhaps the bigger strategic driver is the innovation halo effect by partnering with a tech behemoth like Google. Banks are playing catch-up with fintech startups, and a partnership like this is going to provide them a ready platform to take on the cloud-native, digital challengers without really having to shake up their legacy systems or make substantial investments.

For Google, the move seems primarily to up the ante against its tech rivals more than eating into banks’ lunch, though consequently, the latter might be inevitable. By offering a federally insured bank a/c via its payment wallet Google Pay, it gets access to data streams that flow through bank accounts to build a hyper-personalization engine, thereby tapping the consumers where they are. This would essentially mean taking on Apple Card, Amazon Pay or Facebook’s Libra – all of which have been targeting delivery of financial services via wallets. But, the fact that Google has chosen a broader consortium of global firms, community banks, credit unions and online-only challenger bank indicates Google is looking to offer a vast array of financial services to meet diverse set of needs, without actually holding a bank charter. Second, by offering banks a simplified, enhanced customer-facing engine along with its portfolio of AI and cloud offerings, it may be looking to set itself up as a preferred technology vendor by displacing incumbents such as FIS, Fiserv, Fidelity and Jack Henry & Associates among others. Third, by partnering with over a dozen established brands, Google may just be looking to shore up its understanding of ‘nuts & bolts’ of banking, and then unleash that through a disruptive end-to-end offering. As outlandish as it might sound, one can never say ‘Never’ in the current times.

Given the rising wars over access to consumer data, Google might ultimately end up adopting any one or combination of these manoeuvres to establish its supremacy. Banks, in the lure of getting expanded access to new markets and user base with faster time-to-market might risk becoming merely banking-as-a-service (BaaS) providers. A bigger issue pertains to privacy and data control. Banks for long have been regarded as trusted providers of financial services and custodians of customer data. For all we know, the banks would control the customer relationship as has been the case with Apple Card or Amazon Pay. But that would also mean Google getting access to customer’s financial & interaction data which it can plough back into its targeted advertising efforts. It will be interesting to see what levers banks will use to ensure the account and data ownership rests with them, in a bargain that’s not going to be a zero-sum game.