Since November 2019 when Google and two financial institutions — Citibank and Stanford Federal Credit Union — revealed that they were working to offer Google banking accounts sometime in 2020, everyone in the financial industry has been waiting for the tech behemoth to drop the next shoe.
In early August 2020, six financial institutions — five banks and a credit union — joined the consortium. The group will be collaborating with Google to develop a new type of bank account. The institutions anticipate offering dual-branded federally insured accounts that will reside on their books while Google provides the front-end customer experience and financial insights and budgeting tools. The accounts will be managed through the Google Pay digital wallet.
“I doubt this will be the last of the announcements from Google, given that a ‘more is better’ collaboration mentality may be in play,” says Jim Marous, Co-Publisher of The Financial Brand and Owner/CEO of the Digital Banking Report. “While the actual rollouts may be staggered, this illustrates the desire for big tech players to provide a vast array of financial services without becoming banks, with the added regulation.”
From the start Google has indicated that it intended to work with more than the original two institutions announced.
“Our initial partners are highly innovative, but different in terms of focus and scale,” says a Google spokesperson. “By partnering with both large, global banks and credit unions with deep community ties, we can do a better job building products that meet a diverse set of needs. Our intent is to work with more U.S. financial institutions.”
The new, second group of six institutions demonstrates Google’s intent to try out collaboration with a broad variety of financial organizations. They include the following:
- BMO Harris Bank, a top 25 bank with a ten-state footprint, chiefly in the Midwest, and an active partner with various fintechs.
- BBVA USA, a noted technology leader from among the top 25 U.S. banks with a seven-state branch footprint.
- BankMobile, the all-mobile division of Customers Bank, $17.9 billion in assets.
- Coastal Community Bank, a $1 billion-assets institution in Washington state whose CCBX banking-as-a-service division works with companies such as Aspiration and Ellevest.
- First Independence Bank, at $265.4 million in assets the eighth-largest African-American-controlled commercial bank in the U.S., based in Detroit.
- SEFCU, a $4.6 billion credit union based in upstate New York.
“We heard that they wanted to collaborate with many different types of banks, a good mix of institutions,” says Paul Dilda, Head of Retail Strategy, Products and Segments at BMO, in one of several interviews that representatives of participating banks had with The Financial Brand.
How and Why Institutions Wound Up Working with Google
Back when the original news came in 2019, Google, known for its own ambitions in the financial space, suddenly became the focus of the speculation mill. It didn’t help that the company put out little information beyond confirming a Wall Street Journal article that broke the news. Observers have concluded that Google has no designs on a bank charter, but that the data streams that flow through bank accounts are a strong draw for the voracious data maw that is Google and its parent Alphabet.
“The data streams that flow through bank accounts are a strong draw for the voracious data maw that is Google and its parent Alphabet.”
But even as Google acknowledged the deal with Citi and Stanford, and its interests in working with additional institutions, it wasn’t as if an email address had been posted for financial institutions to sign up.
Dilda says BMO Harris Bank‘s involvement in the program came about as the result of multiple relationships the company already had with Google. The bank itself has been moving further into digital services — its announcement notes that expanding digital deposit gathering to all 50 states helped increase deposits 9% in 2019. The bank sees collaboration with Google as a strong opportunity to learn further how to meet consumer demand that has been increasing during the COVID pandemic.
Laura Byers, EVP and Chief Retail and Marketing Officer at Coastal Community Bank, says the strong involvement with fintechs on the part of its CCBX division weighed in the bank’s selection. She adds that the relationship will be a collaboration between Google and the bank and not a banking-as-a-service (BaaS) play.
Luvleen Sidhu, Co-Founder and CEO at BankMobile, says her organization’s focus on college students as a means of “growing customers for life,” makes it unique among the institutions selected for Google’s second group of collaborators. BankMobile currently banks about two million students today, according to Sidhu, many of them a bit older than the typical age range for college students and often attending part-time while working.
BBVA USA speaks of the collaboration as another use of its Open Platform initiative. “This enables the bank and its partners to acquire and engage customers by embedding financial products that create powerful customer value propositions,” according to a spokesperson. “BBVA Open Platform is a comprehensive developer platform that provides a suite of banking and payments services in the U.S. backed by a global financial institution.” The latter refers to BBVA, the U.S. operations’ Spanish parent.
Representatives of First Independence and SEFCU could not be reached by deadline.
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Regulatory Experience Versus Question of Data Control
All of the bankers interviewed referred to their institution’s regulatory expertise — banks clearly know compliance in detail — as part of what they bring to the collaboration.
This brings up a key issue that straddles both banking regulation and the increased attention big techs have had from Capitol Hill: the privacy and ownership of personal financial data and data based on consumers’ interaction with providers.
“Of even greater interest than the up-front design and CX functionality will be how each organization handles the perception of data control,” says Marous. “Much of the discussion on social media since the latest announcements concerns the lack of trust in Google in using data for the consumer’s good. This perception contrasts with what many believe is a better stewardship of data by Apple and Amazon.”
Marous believes Google must make it clear to institutions and to their shared customers how it will safeguard data and what it hopes to achieve from its access to so much transaction information.
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Institutions See Google Collaboration as Evolutionary Opportunity
Why get involved with Google? “We have been exploring the right digital approach for some time,” says Coastal Community’s Byers. She says the bank sees this as an opportunity to exchange expertise while also increasing the company’s potential reach and building deposit relationships with new customers — and potentially more connections over time.
Similarly, Dilda of BMO Harris says, “it’s important for us to remain relevant and competitive across multiple fronts of consumer banking. This is not going to take us down a different path, but it will put a broad opportunity before us.”
Dilda sees the Google account as being one of multiple digital choices BMO Harris offers to consumers, not something that would become the bank’s sole digital offering. He adds that the institution intends to continue to work with multiple technology partners and collaborators, the choice depending on the specific banking area involved. For example, the bank works with the fintech Blend for elements of its mortgage and home equity operations.
And BBVA’s spokesman indicates that “innovative collaborations with tech-based companies have played a crucial role for BBVA and its digital journey. The bank will continue to focus on these types of partnerships to drive a new wave of customers to BBVA, while also expanding on its digital products in numerous areas of banking.” The bank sees the collaboration as supporting two elements of its five-year plan: expanding its customer base and improving consumers’ financial health.
BankMobile’s Luvleen Sidhu has a more extensive view of the potential of the collaboration’s ultimate impact. She suggests that if the CX of the Google-BankMobile effort proves superior to the bank’s own, she could see supplanting it. She adds that this will not impact the bank’s separate BaaS efforts, such as the partnership with T-Mobile that provides the guts of the T-Mobile Money account on BankMobile’s technology.
“We’re hoping we’ll be able to expand our offerings and open up to millions more, in partnership with Google,” says Sidhu.
‘Early Days’ Is the Answer to Most Questions
Just what the product will be, what it will look like, how it will be priced, what it will be called and other detail questions remain unanswered.
The response from Google and the four banks consulted, above, is that it is early days and that much has yet to be determined. The bankers interviewed all understand that both their organizations and Google will play a part in marketing the eventual product. How far the collaboration will go isn’t clear yet. Whether each organization will work independently with Google, in silos, so to speak, or whether there will be some element of cooperation or at least coopetition, isn’t certain at this point, they indicate.
The announced intent is that the products will be unveiled in 2021, with the timing, again, not fixed beyond that, at least so far as anyone will say.
It’s tempting to classify a Google-branded account as being a play for Generation Z and Millennials — and an official quote from Google’s Felix Lin, VP of Payments Ecosystems, referred to “the evolving needs of a new generation of customers” — but there was some pushback on this from the bankers interviewed. A key matter is that many more people, seniors included, have become interested in digital channels due to coronavirus shutdowns as well as ongoing concerns.
“We are increasingly seeing that customers are not demanding that we open our lobbies,” says Byers. As of early August Coastal Community’s branches are still operating driveup only for human services. “I wouldn’t say that the Google account is particularly generational. We’ve seen a large number of our clients become digital-first during COVID-19.”
“I hate to compartmentalize people by age,” says BMO Harris’ Dilda. “The preference is really based on the customer experience that people want to choose.”
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Ultimately, Who Is in Charge?
In late 2019 Michael Corbat, Citigroup CEO, acknowledged that banks and credit unions working with Google would have to ensure that they not become “dumb utilities” providing the big tech with entrée and paths in financial services without control.
It remains to be seen how things will develop with Google. In public, the company has actually played the whole matter so far like a hand of five-card draw, a game in which the cards remain hidden until the end of the hand.
“When Apple started their collaboration with financial institutions offering the ability to link a bank or credit union card to the Apple Pay app, everyone wondered who would ‘control’ the relationship,” says Marous. “Up until now, Apple has the power of the app while the card the consumer selects is still driven by their relationship with the bank they want to use.” He notes that same holds true for Amazon, where the consumer has a choice of many types of cards to use for different purchases.
But even in those cases, Marous suggests, the consumer perceives a choice different from the perspective of the financial institution.
“In the case of both Apple and Amazon — and even PayPal — the financial institution brand is secondary to the app I use to make a purchase of payment,” says Marous.