Google’s new checking product has massive implications for banks and credit unions

A prediction I’ve been talking about for years came true last week. No, not my New York Jets turning their team around and making the playoffs, unfortunately. I’ve been discussing when large tech companies would get into retail banking, as it was only a matter of time. Last week Google announced that it would start offering consumer checking accounts¹, only months after Apple launched a consumer credit card. The implications for financial institutions is clear: the time to act is now if you want to stay in the game.

Many studies have revealed that consumers have a high degree of trust and brand affinity for Apple, Amazon, Google and the like, and an alarming number of consumers indicated a willingness to leave their bank for a tech provider given the chance. A recent McKinsey & Co. survey indicated that 58 percent of respondents said they would trust financial products from Google.²

Financial institutions should be nervous…one of the largest and most sophisticated data-centric organizations is getting into banking. They will leverage their relationships with consumers and data to create experiences that exceed what FIs can offer today. A Wall Street Journal article on the news stated that “…checking accounts contain a huge amount of valuable data about consumer spending as well as information about how much people earn.”³

If you think a Google bank is just another pure-play retail bank, you’re wrong. Google owns search marketing and pre-roll video media with YouTube...they literally own the media. While Google's revenue from advertising is still significant, it is starting to see signs of shrinking margins because traffic acquisition costs (TAC) are growing faster than revenue. To increase the value of its media, Google needs better data and much better attribution, which go hand in hand.

So why Banking? It is the next and best frontier for data. In a world where clicks are no longer a good measure of conversion and value, Google needs to take it’s advertising platform to a new level. Google can easily, at scale, give you free checking, incredibly built technology to make banking easy, lower loan rates, and higher savings rates…all for your commitment to their products and willingness to surrender your valuable transactional data. Google’s enterprise value will grow many times over as they continue to dominate the ad space, in addition to creating new revenue streams from the aggregation and use of this rich set of data.

There’s still hope for financial institutions that act quickly to defend against this new threat. FIs are sitting on a tremendous amount of rich data, way beyond just the checking account data mentioned in the article cited above. Unfortunately few have figured out how to organize and leverage the data they have, despite major investments in data warehouses. It isn’t enough to just store data in a central repository, you have to know how to organize, categorize and apply the data to solve real problems such as offering timely and contextual offers that speak to each individual consumer and growing share of wallet by bringing “held-away” assets back to the institution.

Segmint has spent more than 12 years analyzing billions of consumer transactions and creating proprietary Key Lifestyle Indicators (KLIs) that empower organizations to make better decisions, deepen customer relationships, and drive growth. Leveraging our capabilities can help banks keep the tech “wolves” at bay. Now if only I could figure out a way to use data to help my Jets. Oh well, there’s always next year…

¹ https://techcrunch.com/2019/11/13/google-to-offer-checking-accounts-in-partnership-with-banks-starting-next-year/

² https://www.pymnts.com/news/banking/2019/google-to-team-with-banks-to-offer-consumer-checking-accounts/

³ https://www.theverge.com/2019/11/13/20962745/google-checking-account-citigroup-stanford-pay-banking-financial-services-cache