Tech Giants Team With Banks

Silicon Valley is teaming up with the world's biggest banks.

Attempts by tech heavyweights to enter the realm of banking are nothing new. The basic idea is for the tech companies to use customers’ personal information to provide payment and savings accounts, which seems straightforward enough. The results, however, have yet to be proven. While most banking customers are unhappy with the high fees and customer service of traditional banks, they are also wary of the growing power of tech giants.

Alphabet, Google’s holding company, announced in November that it had teamed up with two banks, Citigroup and Stanford Federal Credit Union, to offer “smart” checking accounts to users of Google Pay starting in 2020. Details of the product and what will make it “smart” are still to be announced. The news is more in the strategy, which is based on forging alliances with existing banks. For Citi, which has a relatively small deposit base in the US, the alliance may be a clever way to boost its customer base, while Google may want to leverage the business know-how of a large and trusted brand that can offer insured deposits.

“We are 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 [Federal Deposit Insurance Corporation] or NCUA [National Credit Union Administration]-insured account,” said Craig Ewer, a Google spokesman.

Google appears to be following Apple, which in 2019 launched a credit card with Goldman Sachs. Facebook has bucked the trend by promoting a digital currency called Libra, with little success so far. Online retail giant Amazon is reported to be in talks with banks like JPMorgan Chase to create checking accounts.

It is too soon to claim success. Twenty years ago, retailers entered the credit-card business. Some attempted to compete directly with banks. In 2005, Walmart, for example, tried to gain a banking license, but it was stymied by regulators and the lobbying power of the traditional banks. Current regulation still aims, after all, at keeping banking and nonbanking industries separated.