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Unpacking Big Tech’s Foray into Financial Services
After disrupting industries ranging from ecommerce to
advertising, big tech appears to be setting its sights on the financial
industry. In August, Apple partnered with Goldman Sachs to roll out the Apple Card,
a shiny titanium credit card designed to be used primarily with Apple Pay in a
mobile ecosystem.
Then Google announced that it was teaming up with banks and
credit unions to offer checking accounts to consumers beginning in 2020. With
these moves, it is clear that big tech is increasingly focusing on the payments
industry.
To learn more about Google’s announcement and what it means
for traditional players in the payments space, PaymentsJournal sat down with
Prasanna Narayan, Head of Product at Ondot Systems, a leading mobile payment
service provider.
Joining us in the conversation was Sarah Grotta, director of
Debit and Alternative Products Advisory Service at Mercator Advisory Group.
During the conversation, Narayan and Grotta discussed the
details of Google’s announcement, what big tech can bring to payments, and what
this means for the traditional players in the payments space.
Google’s
announcement: Hardly surprising, hardly any details
In November, the Wall Street
Journal broke the news that Google, the global tech behemoth, was the latest
tech giant to enter the finance space. Beginning in 2020, Google will be
offering checking accounts in partnership with Citigroup and Stanford Federal
Credit Union.
“I can’t say that bankers or those
in the payments industry were particularly surprised [by the announcement],”
said Grotta. In recent years, many tech companies have moved into payments.
Similar to Apple’s approach of
offering the service through its branded mobile wallet, Google’s checking
accounts will be available through the Google Pay wallet. Other than that,
Grotta pointed out that Google’s announcement is lacking in specifics.
Due to the lack of details,
analysts can only speculate about what this announcement means for the payments
industry and Google’s long-term strategy for approaching the field.
It might be just an opportunity to
provide an account to go along with its peer-to-peer G Pay services, said
Grotta. This would allow Google to offer something that’s similar to the P2P
solutions offered by Venmo or Square.
However, she said this could also
signal Google’s long-term intention of becoming a challenger bank.
One interesting aspect of Google’s
announcement is that it put the partnerships with Citigroup and Stanford
Federal Credit Union front and center. “I think it might be signaling to
regulators that the financial institutions are going to be really involved,
most likely on the compliance side,” said Grotta.
“Google can offer all sorts of free products and lose money on them if it wants to on a product basis,”
Sarah GrottaAnother point of interest is that
Google doesn’t need to make money on these checking accounts. “Google can offer
all sorts of free products and lose money on them if it wants to on a product
basis,” explained Grotta. This is because offering the accounts would provide
Google with a lot of customer data.
Big tech and the payments industry
As previously mentioned, Google’s
announcement comes at a time when many tech companies are entering the payments
space or are in the process of doing so. Facebook recently rolled out Facebook
Pay, which provides a consistent payment experience across Facebook, Instagram,
WhatsApp, and Messenger.
The tech company also made waves
when it announced it was working on a Libra,
a cryptocurrency project pulling together many of the world’s payment players
(some of which have since dropped
out).
Amazon was rumored to be in
discussions with Chase to offer checking accounts and debit cards, but those
apparently ended without a deal. Despite this, Narayan pointed out that Amazon
has already partnered with Visa to release a co-branded credit card.
He also highlighted how Uber and
Lyft have dabbled in offering financial services. Uber launched a debit card
based checking account for drivers to be able to push money quickly.
What all these instances of big
tech offering payment products show is that expedience and convenience are
becoming more mainstream, alongside trust and security, said Narayan. “So
existing players, the banks, have to balance that in how they appeal to today’s
consumer and avoid being pushed to the sideline.”
The threat big tech poses to FIs
The fundamental threat posed to
FIs by big tech is that brands such as Facebook, Apple, and Google are
phenomenal at creating consumer facing technology that’s seamless and
convenient. In contrast, the banking industry has faced much criticism for clunky
mobile apps that often frustrate users.
“Tech companies have gone above and beyond to think about how consumers’ lifestyle is today and how consumers function,”
Prasanna Narayan“Tech companies have gone above
and beyond to think about how consumers’ lifestyle is today and how consumers
function,” said Narayan. Since many people now spend a considerable amount of
time in mobile environments, these tech companies have focused on offering
amazing mobile experiences.
As a result, tech companies have
created products that enable consumers to save time, get things done, and gain
access to needed information, all in an intuitive and seamless way.
“If you apply that to financial
management, that’s what the financial institutions have to do to keep an eye on
if they are reaching their consumers in the same way,” said Narayan.
Smaller institutions, in particular, need to focus on
improving the services they offer customers. Narayan recommended that FIs offer
digital products designed to easily empower consumers to complete a variety of
financial activities. Whether it be opening an account, signing up for a card,
or creating a digital wallet, these experiences should be quick and easy.
Financial institutions don’t need to create these mobile
apps from scratch. Companies such as Ondot offer white label solutions,
allowing FIs to offer the best tech solutions under their own branding.
The post Unpacking Big Tech’s Foray into Financial Services appeared first on PaymentsJournal.
View all episodes
By The PaymentsJournal PodcastAfter disrupting industries ranging from ecommerce to
advertising, big tech appears to be setting its sights on the financial
industry. In August, Apple partnered with Goldman Sachs to roll out the Apple Card,
a shiny titanium credit card designed to be used primarily with Apple Pay in a
mobile ecosystem.
Then Google announced that it was teaming up with banks and
credit unions to offer checking accounts to consumers beginning in 2020. With
these moves, it is clear that big tech is increasingly focusing on the payments
industry.
To learn more about Google’s announcement and what it means
for traditional players in the payments space, PaymentsJournal sat down with
Prasanna Narayan, Head of Product at Ondot Systems, a leading mobile payment
service provider.
Joining us in the conversation was Sarah Grotta, director of
Debit and Alternative Products Advisory Service at Mercator Advisory Group.
During the conversation, Narayan and Grotta discussed the
details of Google’s announcement, what big tech can bring to payments, and what
this means for the traditional players in the payments space.
Google’s
announcement: Hardly surprising, hardly any details
In November, the Wall Street
Journal broke the news that Google, the global tech behemoth, was the latest
tech giant to enter the finance space. Beginning in 2020, Google will be
offering checking accounts in partnership with Citigroup and Stanford Federal
Credit Union.
“I can’t say that bankers or those
in the payments industry were particularly surprised [by the announcement],”
said Grotta. In recent years, many tech companies have moved into payments.
Similar to Apple’s approach of
offering the service through its branded mobile wallet, Google’s checking
accounts will be available through the Google Pay wallet. Other than that,
Grotta pointed out that Google’s announcement is lacking in specifics.
Due to the lack of details,
analysts can only speculate about what this announcement means for the payments
industry and Google’s long-term strategy for approaching the field.
It might be just an opportunity to
provide an account to go along with its peer-to-peer G Pay services, said
Grotta. This would allow Google to offer something that’s similar to the P2P
solutions offered by Venmo or Square.
However, she said this could also
signal Google’s long-term intention of becoming a challenger bank.
One interesting aspect of Google’s
announcement is that it put the partnerships with Citigroup and Stanford
Federal Credit Union front and center. “I think it might be signaling to
regulators that the financial institutions are going to be really involved,
most likely on the compliance side,” said Grotta.
“Google can offer all sorts of free products and lose money on them if it wants to on a product basis,”
Sarah GrottaAnother point of interest is that
Google doesn’t need to make money on these checking accounts. “Google can offer
all sorts of free products and lose money on them if it wants to on a product
basis,” explained Grotta. This is because offering the accounts would provide
Google with a lot of customer data.
Big tech and the payments industry
As previously mentioned, Google’s
announcement comes at a time when many tech companies are entering the payments
space or are in the process of doing so. Facebook recently rolled out Facebook
Pay, which provides a consistent payment experience across Facebook, Instagram,
WhatsApp, and Messenger.
The tech company also made waves
when it announced it was working on a Libra,
a cryptocurrency project pulling together many of the world’s payment players
(some of which have since dropped
out).
Amazon was rumored to be in
discussions with Chase to offer checking accounts and debit cards, but those
apparently ended without a deal. Despite this, Narayan pointed out that Amazon
has already partnered with Visa to release a co-branded credit card.
He also highlighted how Uber and
Lyft have dabbled in offering financial services. Uber launched a debit card
based checking account for drivers to be able to push money quickly.
What all these instances of big
tech offering payment products show is that expedience and convenience are
becoming more mainstream, alongside trust and security, said Narayan. “So
existing players, the banks, have to balance that in how they appeal to today’s
consumer and avoid being pushed to the sideline.”
The threat big tech poses to FIs
The fundamental threat posed to
FIs by big tech is that brands such as Facebook, Apple, and Google are
phenomenal at creating consumer facing technology that’s seamless and
convenient. In contrast, the banking industry has faced much criticism for clunky
mobile apps that often frustrate users.
“Tech companies have gone above and beyond to think about how consumers’ lifestyle is today and how consumers function,”
Prasanna Narayan“Tech companies have gone above
and beyond to think about how consumers’ lifestyle is today and how consumers
function,” said Narayan. Since many people now spend a considerable amount of
time in mobile environments, these tech companies have focused on offering
amazing mobile experiences.
As a result, tech companies have
created products that enable consumers to save time, get things done, and gain
access to needed information, all in an intuitive and seamless way.
“If you apply that to financial
management, that’s what the financial institutions have to do to keep an eye on
if they are reaching their consumers in the same way,” said Narayan.
Smaller institutions, in particular, need to focus on
improving the services they offer customers. Narayan recommended that FIs offer
digital products designed to easily empower consumers to complete a variety of
financial activities. Whether it be opening an account, signing up for a card,
or creating a digital wallet, these experiences should be quick and easy.
Financial institutions don’t need to create these mobile
apps from scratch. Companies such as Ondot offer white label solutions,
allowing FIs to offer the best tech solutions under their own branding.
The post Unpacking Big Tech’s Foray into Financial Services appeared first on PaymentsJournal.