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Google makes a bid for banking, where other tech firms have flopped

Code-named Cache, the project is seen as an extension of Google Pay but persuading people to hand over their data as well as their checking account may be a hard sell

Google's goal is to help bank customers benefit from useful insights and budgeting tools. But for consumers, the value of Google's much touted "smart checking account" is unclear.

GOOGLE already has a valuable stash of your digital data. Now it wants your cash, too.

The search giant is teaming up with two banks, Citigroup and the Stanford Federal Credit Union, to begin offering a "smart checking" account next year. What fancy new features will "smart checking" include? Google isn't sure. Neither are its partners.

The project, code-named Cache, is envisioned as an extension of the Google Pay digital payments system. Its goal is to help banks' customers "benefit from useful insights and budgeting tools," according to Craig Ewer, a Google spokesman. The focus will be mobile-first users, he said, but the specifics of what will be offered are still being worked out.

Technology companies have been trying to plant stakes in consumers' wallets for more than a decade, with limited success. And banks have realised that digital-native millennials have the same core banking needs - a safe place to stash cash and easy ways to retrieve it - as the generations that favoured marble-floored lobbies lined with teller windows.

But attempts to create digitally focused alternatives to traditional banking have largely found only niche audiences - or fizzled out entirely.

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Hitting snags

JPMorgan Chase recently shut down Finn, a no-fee digital account with limited branch access that was aimed at younger customers. Simple, a startup that hoped to upend the banking industry with tech innovations and customer-friendly terms, was bought by a big bank, BBVA. So-called neo-banks like Chime, Aspiration and Varo have won converts, but their customer bases remain small.

Some recent offerings have hit snags. Apple's new Apple Card, issued through a partnership with Goldman Sachs, is being investigated by New York state regulators after customer complaints about gender bias in spending limits. And Facebook lost key partners like Mastercard and Visa just months after unveiling Libra, its cryptocurrency project.

There are good reasons some of these ideas have sputtered. While customers have plenty of frustrations with their banks - high fees, paltry interest rates and poor service - those aren't complaints that technology companies are usually positioned to solve. And tech-focused features that bank users want, like fast peer-to-peer payments, card-free transactions and in-app budgeting assistance, are now offered by nearly all large banks.

For a new product or service to succeed, it has to offer something new and shiny enough to motivate consumers to leave their existing provider. Thad Peterson, a senior analyst at Aite Group, said many of these efforts failed to take off because they weren't revolutionising anything.

"Human beings are by nature subject to inertia," Mr Peterson said. "And when it comes to banking," he added, "you have to find a way to make something so superior that people want to have it."

Google's initial ambitions for Cache are fairly modest. It is not seeking a banking charter - something it could have done through a new regulatory pathway intended to encourage fintech experiments - and will instead rely on its bank partners to hold and manage customers' accounts. The Stanford Federal Credit Union said it planned to offer co-branded accounts, with Google developing the user interface and the credit union handling all the banking functions.

Citigroup representatives did not respond to a request for details on their product plans.

There are lots of reasons Google would want to edge into the banking industry, said Ron Shevlin, the research director at Cornerstone Advisors, a banking consultancy.

Google wants to increase use of its wallet app, which competes with offerings from Apple and Samsung, Mr Shevlin said. And it may want to deepen its ties to a sector that already uses its technology; some banks, like HSBC, store their data on Google Cloud. And if the company could develop front-end banking tools that interest customers, Google could potentially lace them with ads. (Google previously created, then shut down, a financial products comparison shopping site.) But for consumers, the value of such a partnership is unclear.

As people grow more wary of entrusting their personal data to tech companies, persuading them to hand their checking account over to a partnership involving Google may be a hard sell. And customers typically switch bank accounts only when they're offered something financially valuable, like lower fees, more attractive rewards for spending or higher interest rates. Google and its partners haven't commented on what kind of terms they might offer.

So what will make Google's "smart checking" different from a regular old checking account?

"Those are some of the details that will be determined closer to launch," said Joan Opp, the chief executive of the Stanford Federal Credit Union. NYTIMES

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