A decade ago, when the biggest consumer tech companies first showed an interest in financial services, the banking world dug in for an all-out war. Now that Big Tech is finally stepping deeper into finance, hostilities between the two camps have eased. But given the scale of the tech companies’ ambition, that is unlikely to be the end of the story.
Google’s attempt to promote a new style of mobile bank account is the latest sign that a new rapprochement between the two camps is in full swing. Like a number of the internet giant’s services over the years, Google Pay has been through long fallow periods without much in the way of innovation. It is used on only about 4 per cent of the 2.5bn Android devices around the world, according to Statista.
The app is going through a two-stage revamp. The first, this week, adds new bells and whistles to make it more engaging, as Google tries to make up for lost time. It will now be a place to keep tabs on your various bank and credit card accounts, as well as a conduit for Google to serve up personalised offers from merchants.
The second step is the more groundbreaking. Next year, users will be able to open and manage a mobile bank account directly from the app, starting with Citibank and 10 other banks and credit unions in the US.
Apple’s groundbreaking credit card with Goldman Sachs has become the model for arrangements like this, as well as a strong motivator for other financial institutions to get off the sidelines and find a way to work with Big Tech. Google’s would be the first regular Big Tech checking account, though almost certainly not the last.
A lot has changed since Google first showed up at the financial services party. At the time, smartphones were in their infancy, and the tech companies were open about their goal of disrupting any industry they entered. The upheaval they had caused in the media world marked them out as unreliable partners.
Distrust of Big Tech is still strong. But the reach of its mobile technology and the changing expectations of users have made it impossible to ignore, and financial services of all kinds are being reimagined for a younger generation brought up on smartphones.
The outlines of the Google arrangement highlight the common ground that tech and financial services companies have found. The banks will maintain the accounts, while Google Pay will act as the “front end” for accessing and managing them. That means the user experience will essentially be owned — and branded — by Google.
The account itself will keep the branding of the bank, but the opportunities for differentiation seem minimal. The new accounts — all carrying the name Plex, as in Citi Plex — will need to meet a set of specifications set by Google, for instance with no fees and no minimum balance.
There is an obvious precedent for this alliance. It closely follows the deals that Apple struck for the iPhone more than a decade ago, when mobile operators lined up to sell the device. Those arrangements left the tech company with full control over the user experience, and it turned the phone company — or in this case, the bank — into the provider of an essential, but increasingly undifferentiated, “back-end” service.
As AT&T found after striking the first partnership with Apple for the iPhone, though, there is still a lot to gain from tapping a big new market. For Citibank, this could become a way to access retail deposits at scale — and to draw in millions of new customers. Keeping the ability to cross-sell other financial products to Plex account holders will be key.
The bigger question is how far Google will want to go in serving all of its users’ financial needs.
For now, it may own the customer experience, but it won’t own the customer. The transaction data remain with the bank, and Google’s ability to use it is severely limited. Only in one narrow way — and then, only if a user opts in — will it get to make use of transaction data, to serve up personalised offers from other merchants inside the Pay app. A full understanding of its users’ financial lives would be hugely valuable to Google in its broader advertising business.
For now, tech companies such as Google see much more to gain from working with the banks than trying to take them on. Their willingness to turn these into lasting relationships of mutual interest will be an important test of how trustworthy they will seem to other industries in future.