Google to offer personal checking accounts, Citi and Stanford partner on the project

How will Google’s Cache product leverage banking links for unique value?

Alphabet Inc’s Google just announced that it will start offering personal checking accounts in 2020 via its Google Pay application, a project supported by Citigroup and a credit union at Stanford University.

The information comes from Reuters. The project is named Cache and is a direct rival to Apple and Facebook, two giants who are also trying their best at consumer finance products. While it may seem unorthodox for tech giants to be involved in consumer finance solutions, it is not that surprising, since these digital payment apps can cater to variety of needs such as brokerage services, loans, bank accounts, and many more. This new trend is generating revenue streams for these companies.

One concern, of course, is regulation, especially given the size of tech giants, and most recently the regulatory oversight that Facebook’s Libra got. Google will be developing the new checking accounts, and it has already discussed initially the idea with regulators. According to Reuters, it is not known which regulators the tech giants has approached so far. One comment on the new Google’s product came from US Senator Mark Warner who said that there should be “very strict scrutiny”.

For now, it is known that both Citi and Stanford Federal Credit Union are partnering on the project with Google. Both partners have confirmed their involvement.

Google’s spokesperson, Mr. Craig Ewer said the following regarding the new consumer finance product:

We’re exploring how we can partner with banks and credit unions in the U.S. 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.

On the other side, Citi’s representative said that this is a way for the bank to expand their customer base, both in reach and in breadth. It’s an interesting trend that analysts have noticed recently, as Reuters reported. More and more traditional financial services companies partner with not-so-traditional players to form unconventional products for their customers, while expanding their balance sheets. Such symbiotic relationship can be observed between Apple and Goldman Sachs (credit card solution).

Google is playing a smart game here. The tech giant may be able to achieve its goals without even the need of bank regulators. One example given by Reuters is that since deposits are stored in a special account managed by a fully regulated bank and protected by FDIC and NCUA (National Credit Union Administration), if the lender decides not to share financial data with Google, then the company may not even face requirements for licenses or any other problems.

Surprisingly, it is not the USA where Google is thriving with the Google Pay app – it’s India, where Google enjoys the trust of over 66 million users. Google Pay is used for digital transactions such as paying your utilities or groceries.

The challenge for Google, according to employees, is that the company is facing fierce competition in the payment services industry, as the US market is so saturated and there are so many advanced solutions for digital payments. Still, the company can draw it consumers by “seducing” users with loyalty perks and high interest rates of deposits.

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