Following in the footsteps of Apple Pay and the Apple/Goldman credit card, Google owner Alphabet is finally making its move to expand its rudimentary Google Pay service into a checking account that can also grant users access to other cards and discounts.
The upgrade marks Google’s deepest foray yet into the US financial system, just as the pandemic speeds up the shift toward a “cashless society” and authorities raise concerns about Chinese super-apps such as Alipay and WeChat.
Instead of applying for a banking license to try and challenge the existing banking system directly, Google is already working with 11 partners banks, including Citigroup, which on Wednesday launched a wait list for accounts built for the new ecosystem, and Stanford Federal Credit Union.
“We’re working very closely with the financial industry,” said Caesar Sengupta, vice president of the payments business at Google. “We want to make sure we’re meeting all the standards that regulators and others have set.”
Another Citi executive named Anand Selva, the CEO of US consumer banking at the megabank, said the company sees Gen Z as its biggest target audience since many of them are only just becoming adults, and therefore likely don’t have strong banking relationships developed just yet.
“It’s going to have a broad appeal, but especially among the younger population, Gen Z, that are more tech-driven and mobile-focused,” Selva said.
To be sure, partnering with Google on a project like this could be tantamount to letting the fox into the hen house. One potential risk for Google’s banking partners is allowing the tech giant to “own” the customer relationship by controlling the platform.
One potential risk for banks is that tech companies will own the customer relationship and branding in these deals, keeping a lucrative part of the deal. Still, Citi’s Selva said customers know Citi is the one holding the deposits.
“The account is a Citi product, but customers get the best of both worlds with the Google ecosystem,” he said. The “traditional banking model is evolving” and Selva said partnerships are becoming a key part of the industry’s future.
As Bloomberg explains, Google’s move is the latest attempt by a Silicon Valley behemoth to try and insert itself into the world of commerce and tap the valuable ocean of transaction data collected on its users. Google Pay launched in 2015, and has so far amassed 150 million users in 30 countries. Friends mostly use the service to pay for goods online or send money to one another (in a function similar to Venmo).
Financial titans have long feared that US tech giants like Apple and Google might launch hugely successful lending and payments apps like WeChat and Alipay, which are ubiquitous in China, as the use of straight cash has fallen out of favor. But by joining forces with its partners banks, Google is essentially creating a “platform” on which banking services (including Google’s new “Plex” checking accounts) can be purchased and used, while Google hoovers up all that valuable data. In return, Google’s smart payments system will inform users about deals and discounts.
Jane Fraser, the incoming CEO of Citigroup, heralded the partnership between Google and Citi as an important new opportunity for the bank: “This collaboration gives us a platform to drive significant scale in our retail bank,” Fraser said.
With Google, “we can deepen our existing relationships and serve an exponentially larger and new generation of customers.”
Google’s Plex customers will have access to Citi’s 60,000 ATMs. There won’t be any minimum balance requirements or other rules and restrictions.
Like Apple and Amazon, Google is diving headlong into a new industry – financial services – as the DoJ continues to investigate alleged anti-trust abuses at Google and other Silicon Valley giants. In a statement, Google’s legal team said they don’t see this new venture as harming competition.”
If Google’s new project takes off before the next pandemic, maybe instead of ‘PPP’ and the stimulus checks, the Fed can simply unilaterally print an unlimited quantity of Fedcoin deposited right into your virtual checking account.