Paschal Oparada
In what appears to be the biggest push yet, Google announced recently that it is beginning banking services by offering checking accounts to customers.
Google will start the service early next year as reported by The Wall Street Journal. It is calling the project Cache.
This, it says, it will do in conjunction with CitiBank. CitiBank operates in Nigeria.
A spokesperson for Google said the company will be seeking to put its financial institution partners much more front-and-centre for its customers than other tech companies have perhaps done with their financial products.
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Already Google has Google Pay, which has over a hundred million users.
Google Pay is the fast, simple way to pay online, in apps, and in stores. Plus send money to friends, split bills, and cash in on loyalty and rewards – all without your wallet. It will tie the checking accounts to Google Pay.
“Our approach is going to be to partner deeply with banks and the financial system,” Caesar Sengupta, general manager and vice-president of payments at Google told the Journal in an interview.
“It may be the slightly longer path, but it’s more sustainable,” Sengupta was quoted as saying in the report.
So why even bother getting into financial services if it’s leaving a lot of the actual banking to traditional financial institutions?
Google obviously stands to gain a lot of valuable information and insight on customer behaviour with access to their checking accounts, which for many is a good picture of overall day-to-day financial life.
Google says it’s also intending to offer product advantages for both consumers and banks, including things like loyalty programs, on top of the basic financial services. It’s also still considering whether or not it’ll charge service fees, according to Sengupta, not doing so would definitely be an advantage over most existing checking accounts available.
The move is largely targeted at the Millennials who are tech-savvy and seek to have more control over their financial lives.
Google is not the only big tech company to foray into the banking sector. Early this year, Apple announced its Apple Card, a premium credit card, in partnership with Goldman Sachs and MasterCard.
Although Apple Card is only available to users in the U.S. for the moment, analysts believe it is the loudest statement yet by the Cupertino-based tech company that it is going into the banking sector with a bang.
The Apple Card is a primarily digital card that lives in the Wallet app on a cardholder’s iPhone. Cardholders have the option to request a physical titanium card.
The Apple Card’s cash-back program is tailored to the company’s products, services and mobile wallet.
Users can earn 3% cashback on goods or services purchased directly from Apple (including Apple retail stores, the Apple online store, the App Store, iTunes, Apple Music and other Apple-owned properties), 2% cashback on Apple Pay purchases and 1% cashback on all other purchases.
Even though Facebook’s much-anticipated Cryptocurrency launch may not be viewed as core banking services, financial experts believe Facebook’s Libra, as the company calls its cryptocurrency, would impact heavily on the banks and the banking public.
When launched anytime next year, Libra promises to disrupt payments. Already the social media giant controls messaging and chat portals through its WhatsApp and Messenger. It would use these platforms to control what happens with payments when Libra finally berths.
Calibra, Facebook’s digital wallet, will store Libra, Facebook’s digital currency. A Facebook user would download the Calibra digital wallet application, purchase the Libra digital currency through a financial network, and then perform peer-to-peer digital money transfers through Calibra as a stand-alone app. A user could also do the same thing through Facebook’s most popular communication platforms of WhatsApp and Messenger.
The cryptocurrency app will allow Facebook users to send, add or withdraw money “in just a few taps,” using WhatsApp, and it will allow someone to fill their wallet, cash out or split a restaurant tab all using Messenger, the company said.
“We hope to offer additional services for people and businesses, such as paying bills with the push of a button, buying a cup of coffee with the scan of a code, or riding your local public transit without needing to carry cash or a metro pass,” the company explained on its Calibra page.
The Calibra app will also show exchange rates for changing fiat currency, like the U.S. dollar, into Libra digital currency and back again. Because it’s based on blockchain, Facebook is cutting out the middleman, a central bank or clearinghouse, that eliminates the majority of costs associated with financial transactions today.
“Transaction fees will be low-cost and transparent, especially if you’re sending money internationally. Calibra will cut fees to help people keep more of their money,” Facebook said.
Chinedu Obiozor, a financial analyst, said if the plan by most of these big tech companies come to pass, it will disrupt and impact negatively on financial institutions in Africa, especially Nigeria, where people see the banks as greedy.
“With the way the banking public in Nigeria is complaining of multiple charges, I will not be surprised if they wholly embrace digital banks owned by these big tech companies,” Obiozor said.
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He said there are surreptitious moves by banks in Nigeria to stop most of these big tech companies from launching their products in Nigeria.
“As I speak to you, there is intense lobbying by big banks in Nigeria not allow the central bank license some of these tech companies because they are aware of the damage their products can cause to their cut-throat services in the country,” he said.
Even though these tech giants are leaving core-banking transactions to traditional banks, for now, their incursion into the banking space means they are taking a huge leap as they target the Millenials.
What should the conventional banks do? Wholly embrace fintech as the way forward; else they’d be replaced by emerging digital banks dominated by tech giants with the financial muscle to pull the strings.