What 'Google Checking' means for community banks

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What Google ultimately does with its Google Checking service for banks will have a major effect on how mobile payments at all levels — from point of sale, to e-commerce, P2P and bill pay — will move forward.

Word late last year about Google's intention to offer checking accounts, known as Google Cache, through Citi and Stanford Federal Credit Union, opened the door for speculation about what it could mean for banks.

It also thrust Google into a place that most of the other tech companies engaged in payments have not yet dipped their toes — being a meaningful partner that could deliver all of the elements a bank would want for digital advancement. Those include instant card issuance and use, a channel to reach younger consumers, faster deployment of digital services, and setting the table for improving bill-pay and other services.

"I think Google looks at itself as the 'white knight' for all of those smaller community banks and institutions," Heidi Liebenguth, managing partner and research director at Crone Consulting, said during a Finovate webinar in which payments experts speculated on the potential effects of Google Checking.

Google declined to update the progress on Google Checking. But that didn't stop payments execs from envisioning what the service could bring.

It's a similar stir as to what Apple created with Apple Card and issuer Goldman Sachs, a move last summer that immediately put retail banks on alert for the same reasons — that digital enrollment and instant card issuing and use would be hard to compete against.

A key difference, however, is that in first offering Apple Pay and then the Apple Card, Apple has put the bank partners behind the scenes. The Google Checking account does the opposite by more clearly working with its initial bank and credit union to offer services in those institutions' names.

"As payments become embedded in commerce, tech giants see the potential in participating in the monetary ebb and flow, and if you obtain consumer mindshare, you obtain marketshare," said Vaduvur Bharghavan, CEO of Ondot Systems, a San Jose, Calif.-based provider of value-added mobile card services.

"As a stand-alone business, this is very attractive, and an opportunity for tech giants because they have the drive and ability to understand consumers and deliver services," Bharghavan added during the webinar. "This is not a one-off and I think we can expect to see a lot of tech giants come into this field."

If that is the case, as payments stakeholders wait to see what the next moves of Google, Amazon, Apple and Facebook might be, recent Juniper research indicates that consumers are becoming more comfortable with at least some of these companies when it comes to handling their finances.

The research showed 65% saying they would trust Amazon, compared to 58% citing Google and 56% trusting Apple. Facebook rated the lowest at 35%.

In some ways, Google is simply taking the embedded payments model that is becoming more common and applying it to a distribution channel that will have many ways to connect with consumers — and not just through the bank's controlled channels, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.

"It is the idea of embedding banking across the spread of the network, where anyone can bring in a new consumer in the moment," Crone said. "It would be open to all banks, and eventually maybe retailers and you expect Google Pay to play a key role as other features, including bill pay, are introduced."

Google is focusing on the "most transaction-rich, personalized interaction in the ecosystem" with a demand-deposit account, Crone said. "It is where your payroll goes into and where your spending comes out," he added. "There is nothing more rich for building a foundation for personalization than the checking account activity that occurs."

Banks that get involved with Google Checking or future services like it have the opportunity to reach far beyond their normal customer database, plus would have the leverage of Google Pay to attract younger customers, Crone said.

Much needs to be learned about how Google Checking will integrate, what sort of fees or interchange would be part of the equation, and who stores and controls customer data.

But the handwriting has been on the wall for banks for a long time as it relates to whether to embrace mobile payments and digital money movement.

"With embedded payment, the 'Pays' have a touchpoint, platform and distribution channel for interacting with consumers directly while amassing data for creating net new-value aggregated services," Liebenguth said.

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