On November 13, Google announced that it will offer personal checking accounts in 2020 through its Google Pay app; the project is code-named Cache. Initially, it will be offered in partnership with Citigroup Inc. and Stanford Federal, a small credit union at Stanford University.
Google said that Citigroup and Stanford Federal will handle the financial backend and regulatory compliance. Additionally, the accounts will be branded as coming from those banks. Google ensured it would not sell checking account users’ financial data, while also noting that it does not share data from current Google Pay users with advertisers.
Tech Crunch stated “[Google’s] motivation…appears to be seeking out and attracting younger and more digital-savvy customers who are increasingly looking to handle more of their lives through online tools.”
Google’s announcement comes as Facebook and Apple are working to move into the consumer finance sector, creating new income for these companies and a means to strengthen consumer’s reliance on these companies.
U.S. regulators are concerned about the trend to move into the finance sector by Google and other tech giants. Regulators fear their influence and how the companies will handle data privacy, in light of previous poor handling.
Earlier this year, Apple launched Apple Card, a credit card in partnership with Goldman Sachs. Facebook announced Libra, its attempted cryptocurrency. Facebook also recently announced Facebook Pay, a service that allows users to send money via its social networks and apps. Amazon has Amazon Cash, its way for consumers to pay without a credit, debit, or bank card online, it is also looking into offering checking accounts to teens. These new financial products and services have caused trouble for these companies.
Apple’s Apple Card, which launched in August has both a digital and tangible form. It does not have the traditional 16-digit, CVV, or expiration date; instead, it will randomly generate numbers for each transaction. Apple promises Goldman Sachs won’t be able to track user purchases. The goal is to be accessible to every iPhone user. The Apple Card is connected to the Apple Wallet app, creating a pleasing interface to view purchases. It will also offer a rewards program. Since the card is issued by Goldman Sachs, they are handling the customer support, not Apple. Similar to Apple, Google’s checking account, Cache, will be offered within its Google Pay app – allowing Google to control user interface and experience. Both endeavors require the tech companies to work with financial institutions to provide services, such as credit cards and checking accounts, typically reserved for banking and financial institutions. Both Apple and Google are using the banks for the technical banking aspects and regulatory measures. The tech companies provide the convenience and loyalty rewards, and the financial institutions take care of the financial and technical banking matters. Of note, the Apple Card is being investigated for gender discrimination regarding credit limits.
Google wants to put its financial partners front and center than other tech companies have done. “Our approach is going to be to partner deeply with banks and the financial system,” Caesar Sengupta, Google executive said. “It may be the slightly longer path, but it’s more sustainable.”
“We’re exploring how we can partner with banks and credit unions in the US 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 spokesman said in a statement.
Google could face some challenges trying to get people to use its Cache account. “The consulting firm McKinsey & Company found only 58% of people surveyed said they would trust the company with financial products.” Google will have to work to convince people it can be trusted with their financial information given Google’s recent privacy and security issues.
Google’s Cache banking announcement comes a few days after it was revealed that Google had millions of medical records without patient knowledge as part of Project Nightingale with healthcare provider Ascension. In light of the incident and other security breaches, Google must be careful about consumers financial data. This comes after Google announced it is set to acquire Fitbit; another move by Google for personal consumer data and to be further involved with consumers in various aspects of their lives, from finance to health.