Google plans to launch checking accounts next year through a project code-named “Cache,” The Wall Street Journal first reported on Wednesday.
“We’re exploring how we can partner with banks and credit unions in the United States to offer smart checking accounts through Google Pay, helping their customers benefit from useful insights and budgeting tools, while keeping their money in an FDIC or NCUA-insured account,” a Google spokesperson said in a statement provided to the E-Commerce Times by Craig Ewer, Communications Manager, Shopping & Travel.
“Our lead partners today are Citibank and the Stanford Federal Credit Union, and we look forward to sharing more details in the coming months,” the spokesperson said.
The accounts will carry Google’s financial institutions partners’ brands, and the company will leave “the financial plumbing and compliance” to its partners, Caesar Sengupta, who leads Google’s efforts in payments, told the WSJ.
For example, Google will deliver the interface, and the Stanford Federal Credit Union will support the accounts.
“We believe our partners’ regulatory and financial know-how is a great complement to our experience in building helpful tools and technology for our users,” the Google spokesperson said.
This approach “is smart, as it should keep them out of the gunsights of the regulators who have been pissed about Facebook’s cryptocurrency,” commented Rob Enderle, principal analyst at the Enderle Group.
Entering directly into banking “would be catastrophic for Google and would likely fuel the effort to break them up,” he told the E-Commerce Times.
Antitrust regulators at the European Union are investigating Facebook’s plans to launch its Libra cryptocurrency, and United States lawmakers have raked CEO Mark Zuckerberg over the coals in Congress.
Consumers using Google’s service will access their checking accounts through Google Pay.
The Google Pay team “has been working for years to help make money simple and accessible for our users, in close partnership with banks, credit unions, and the existing regulatory and financial systems,” the company’s spokesperson said.
Google has not yet decided whether it will charge a fee for the checking account service, Sengupta noted.
Business and Consumer Benefits
“Consumers will likely get better access to payment technologies, so there’s a convenience benefit,” suggested Tim Erlin, VP, product management and strategy, at Tripwire.
People who need banking services but do not have them may find the Google service “better and safer than cash,” Enderle observed. “This should be particularly useful for those that are tired of using cash for things like legal marijuana.”
Businesses will get more potential customers and see the need for cash reduced, Enderle said.
Google’s move might help the banking industry, which “needs to find a way to stay relevant as fintech revolutionizes it,” Erlin told the E-Commerce Times. “Partnering with Google on an effort like this provides one such opportunity.”
Big tech firms have been pushing into the banking industry to leverage their digital prowess, Fannie Mae’s third quarter 2018 National Housing Survey (NHS) indicates.
Thirty-six percent of Americans signed into third-party payment apps — such as PayPal, Venmo, Apple Pay and Google Pay — to conduct financial transactions, the survey found.
People between 18 and 34 were statistically more likely to trust their favorite tech company with their financial activities, based on the survey results.
“Strategically partnering with innovation in the payments evolution is critical to remaking relevance and meeting consumer expectations,” stated Joan Opp, the credit union’s president and CEO.
The US$3 billion credit union, which serves the Stanford community and employees of many Bay Area tech companies, focuses heavy on providing digital services to meet the expectations of its tech-savvy members.
The Thorny Issue of Privacy
Google will not sell checking account users’ financial data, Sengupta pledged.
“I believe this is true,” said Ray Wang, principal analyst at Constellation Research.
“I also believe that Google will end up with richer consumer profiles used for its ad engine,” he told the E-Commerce Times.
Checking account data itself is not important for that purpose, Wang explained. “The activity and engagement data paired with the rest of Google’s operations make it a very powerful data-driven digital network for ads.”
The penalty Google would incur from selling checking account users’ data “would exceed any likely financial benefit,” Enderle observed. Google “may have no attention span but they aren’t stupid.”
It is worth asking what other data Google might have access to and how that would benefit it, Tripwire’s Erlin noted. “It’s also worth asking what benefit Google might derive from the data directly, without selling it.”
Google needs to pay very careful attention to privacy.
“Any time you give access to data there are privacy and security issues,” Erlin cautioned. “The question is whether the benefit derived by the consumer is worth the risk.”
It’s in Google’s best interest to obfuscate the potential risk in order to ensure that consumers see only the benefits, he said. “Any time data is aggregated, it makes for a bigger target for attackers.”
Project Cache is not Google’s first foray into the financial sector: It previously launched, and later shut down, the Google Wallet debit card; the Pony Express service, to allow bill pay through Gmail accounts; and its online shopping comparison site, Google Compare, which let consumers compare auto insurance quotes, credit cards, banking products and mortgage products in the United States and the UK.
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