Big tech has pushed into the FinTech space for some time. So what will Google’s new initiative mean for the industry?
Google has announced plans to roll out a checking account service at the beginning of 2020. The tech titan is launching the initiative together with Citigroup and a Californian credit union.
The project will enable users to access their bank accounts through the Google Pay app, according to the Los Angeles Times. The accounts would carry federally guaranteed insurance.
Of course, this is not the first time a major tech player has muscled in on the FinTech space. In the past, Uber, Alibaba, Facebook and Amazon have launched similar initiatives in the past. “Google’s launch of smart checking accounts in the US this week is just the latest move along these lines,” David Gardner, financial services partner at TLT LLP, the law firm, tells FinTech Global.
He warns that, unchecked, tech titans could change the financial services space. “One of the biggest threats to the banking sector as we know it clearly comes from big tech,” Gardner says.
So why does he think this is a problem? “Tech giants are already working with established, regulated firms in financial services sectors, resulting in an array of reciprocal but often uneasy frenemy relationships,” he argues. “Tech players have mastered slick, personalised, mobile-based user experiences that consumers have come to expect from all their online interactions and financial services firms recognise the value this and how hard it is to replicate.
“On the other hand, the tech giants remain nervous of taking on full authorisations and banking licences and often prefer to leave the more heavily regulated and risky financial elements to their preferred financial services provider partner. The growing array of partnerships in the space leverage these mutual benefits and provide a tantalising glimpse into what the future of finance is likely to look like.
“It’s not surprising that Google’s new account primarily targets mobile-banking users, which is home territory for Google as one of a suite of services for its exclusively digital-native user base. This represents a considerable challenge for banks, particularly more established players with broad customer bases including more traditional customers, who need to service digital natives whilst also rationalising but maintaining alternative channels for older or less digitally-aware customers.”
Gardner is not the first person to voice these concerns. As FinTech Global reported in October, concerns about how the Googles of the world can use their huge datasets and brands to push out smaller firms have been around for some time.
That being said, they also bring opportunities. For instance, a KPMG report has highlighted that tech titans’ entry to the market could also open up for partnership between them and financial institutions.
Similarly, research from the Bank for International Settlements (BIS), the financial institution co-owned by over 60 central banks, noted that big tech firms only control a small proportion of the market.
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