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Tech giants join smart banking 

Google and Citigroup have partnered to offer smart checking accounts through Google Pay.

Adriana Amato Nov 26, 2019

The big incumbent banks have always viewed the so-called FAANG companies (Facebook, Apple, Amazon, Netflix and Alphabet's Google) with uneasy suspicion (except of course when they’re courting them for blockbuster IPOs).

Unlike many challenger banks, these tech giants have the financial firepower and distributed user base to warp the banking market in a small amount of time. And yet, these companies kept their powder dry. The idea always was that the big tech companies didn't want to get involved in a capital-intensive, hyper-regulated industry such as banking.

But as time passes, this view is increasingly invalid. Just look at the recent announcement of Google and Citigroup’s partnership. The two giants will team up to “offer smart checking accounts through Google Pay”.

What this means in practice is vague – but it’s hard not to get the gist: customers will get to use Google’s industry-standard user interface, backed by a trusted name like Citi.

Google has played it fairly diplomatically compared to Apple, however. Apple recently announced its own credit card with Goldman Sachs. The company raced out the gate with a slogan that boldly claims: “Built by Apple, not a bank”. 

Despite Apple’s punchy sloganeering, though, the tactic is the same as Google’s: blend its own clout with the banking infrastructure and consumer trust of an established bank. At the same time, the hope is that the accounts will funnel new users into Apple’s existing products.

The FAANGs are boxing clever. Google knows, for instance, that users know (and enjoy) the Google ecosystem and use their apps a lot. But that popularity hasn’t quite turned into ubiquity yet. The aim is to turn these ecosystems into everyday apps that users rely on for everything – banking included. 

At the risk of grossly over-simplifying, a bank is a balance sheet, a data processing system and a sales operation. The problem facing banks is that their services are generic in an era of vertical specialities.

As Frank Rotman of QED investors has observed, the wide availability of data is altering consumer behaviour – including in banking. We’re seeing, as Rotman writes, “purchase behaviour guided by near-perfect information”.

Customers don’t need – or necessarily want – the one-size-fits-all comfort of a big bank. They’re free to shop around, powered by data and best-in-class consumer channels.

Tech companies may be content to leave the heavily regulated balance sheet side of things, but they are coming for the rest. These partnerships also turn consumer’s enduring trust of banks from a hurdle into a benefit.

Nearly four-fifths (77%) of British consumers think banks are economically essential, this sentiment won’t be overcome easily. The outright replacement of big banks is a pipe dream – but that doesn’t mean there’s no room for innovation.

Capitalise recently launched Instant Offers with a High Street bank, for example. The partnership creates “instant funding offers” for small and medium enterprises. This leading bank has the capital and pedigree of a high street bank and Capitalise has a network of accounting partners and highly relevant accounting data.

For consumers, it creates a product that makes life simpler. The logic of straight-out competition is increasingly outdated in a world of open banking and APIs. Rather than more competition, it’s about creating choices.

Not only a choice of provider but the ability for consumers to move frictionlessly between their different accounts. There’s no need for your different financial identities to be siloed any more. And that’s great news for you and your business. 


Book a consultation today to hear more about the choices available for you.

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