Google checking accounts: Why banks and credit unions want in

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Google has now signed up eight financial institutions as checking account partners, once again raising the question — what's in it for them?

The partners are a diverse group — three global firms (BBVA, BMO Financial Group and Citigroup), two community banks, an online bank for college students and two credit unions. Six of those, including BBVA and BMO, as well as New York's State Employees Federal Credit Union, were announced Monday. Stanford FCU announced a partnership with the tech giant late last year.

Neither side is forthcoming about who pays whom for the the checking account relationships, or how much. And questions remain about consumer privacy issues.

But several of the new partners interviewed for this story said the marketing and technology-sharing opportunities that a relationship with a tech giant like Google offers are simply too great to pass up.

Innovation effect

Emmett Higdon, director of digital banking at Javelin Strategy & Research, said financial institutions are most likely looking for what some experts call an innovation halo effect.

“They're looking to get the brand recognition of being aligned with Google,” he said.

Coastal Community Bank in Everett, Wash., says that's true but that there will be tangible benefits, also.

“For us, this is a great opportunity to leverage Google’s expertise with technology and offer enhanced customer experience that we could never dream of,” said Eric Sprink, president and CEO of the $1.2 billion-asset bank. “It gives a platform for our customers we couldn’t build ourselves in any reasonable time frame.”

Exactly what Google will provide is “yet to be disclosed and discussed,” Sprink said. “But the infrastructure of their tech base is much greater than what we have, so the potential to give our customers an elevated experience is being built.”

The bank has been in discussions with Google for 14 months, Sprink said, “sharing ideas, discussing different things we were working on, keeping them informed of our progress, and building the back-room infrastructure that is required, including know-your-customer and Bank Secrecy Act monitoring.”

Coastal Community’s recent tech upgrades were a factor in Google’s choice of the community bank as a partner, in Sprink’s view.

In January, the bank announced an agreement with the fintech cloud-based core banking software provider Neocova to develop and implement a unified data warehouse solution with an integrated dashboard and reporting engine as well as a BSA and anti-money-laundering monitoring tool. The dashboard gives Coastal a read of all data from banking-as-a-service partners in a unified reporting platform, as well as a platform to hold required partner data securely.

Deposit and customer growth

Some institutions simply hope to find new customers among Google’s 1 billion monthly active users.

“We anticipate that this initiative will help us reach more customers, more efficiently using digital means,” a BBVA spokesperson said.

Ernie Johannson, group head of North American personal and business banking at BMO Financial Group, said her bank’s partnership with Google fits its strategy of rapid growth in the U.S. market.

“This provides us with an ability to access new customers,” Johannson said. “We've been focusing on acquiring new customers and doing that in a digital manner. This was a natural next step in that journey.”

The bank has already been acquiring customers in all 50 states through its digital offerings.

For SEFCU, Stanford FCU and any other credit unions who align with the company, there could be hurdles ahead. Credit unions face field-of-membership limitations that restrict who they can serve, which could hamper those institutions' push to grow their member base.

Being embedded in Google Pay and being part of a Google-created interface for managing payments and deposits “is really exciting for us,” Johannson said.

Johannson said she’s had many discussions with Google about its vision for these accounts, though she declined to share anything specific and added that the vision is likely to evolve over time.

The bank will benefit from being integrated with Google Pay when customers make online payments, she said.

“It’s important for us to be present where our customers are and as experiences evolve digitally, we want to be there,” she said.

Google will also be able to bring its data, marketing and innovation expertise to this joint effort.

While BMO has the same innovation spirit, “we may not necessarily have the same real estate to be in that kind of an experience,” Johannson said. “This is bringing banking into that experience and allowing us to have access to new customers.”

These accounts will definitely be BMO accounts, but the details around branding are still under development, she said. She’s not sure if the eight banks Google is working with will each look a little different within Google Pay.

“I'm not sure how that will evolve,” Johannson said. “It's still at the early earliest stages.”

It’s also not certain yet what kinds of insights Google will provide account holders, but they could potentially incorporate search, browsing and location data.

Data privacy and security will be built into the collaboration, she said.

Banking as a service

Like Coastal Community, BankMobile — a New York-based unit of the $17.9 billion-asset Customers Bancorp — has been building a banking-as-a-service business for some time. One of BankMobile's notable existing partners is T-Mobile.

“Our model has always been, how do we partner with the right partners to provide the best customer experience and continue to solve their pain points in more innovative and better ways?” said Luvleen Sidhu, co-founder and CEO of BankMobile.

Sidhu pointed out that BankMobile already works with about 800 college campuses and has relationships with about one in three U.S. college students.

The average age is 27-28; 70% work part time while going to school; two thirds are women, and a significant portion are single moms; and two-thirds are people of color.

“Being able to provide them with the best financial experience that helps financially empower them to make better decisions, manage and save and grow their money, we feel the technology with Google can really help them achieve that,” Sidhu said.

The partnership combines “our unique customer acquisition funnel with technology coming from one of the best tech companies in the world to provide students that are living paycheck to paycheck, going to school, working part time or full time, with tools and insights to provide them an even better banking experience,” she said.

Sidhu hopes the association with Google could draw more students to BankMobile.

“For some of our students, it takes some time to even learn about BankMobile,” she said. “But no doubt they have heard of Google so the brand equity and technology behind Google and its ability to provide awesome customer experiences will help us serve our customers.”

Could there be unintended consequences?

These deals raise many questions around data privacy, the first being, how much account data will Google have access to? No one will answer this today. Google declined a request for an interview on Monday. But there are other questions, too.

“If I’m a heavy Google Chrome user, do I have to link my Google account to my bank accounts?” Higdon asked. “And if so, what control do I have over what data gets shared with Google? What profile and other online activity data is going to be shared with the bank?”

On top of the privacy risks, banks and credit unions have always feared the threat of a major digital player like Google moving into banking.

Higdon suggested that Google could be working with these institutions simply to learn about the business of banking.

“But once Google has learned everything that they think they need to learn, it seems very likely that these partnerships will be shut down at some point in time,” he said.

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