Once considered an industry joke, this statement is slowly becoming a reality. Recent reports highlighted that Google in partnership with CITI and Stanford Federal Credit Union is testing its own Google-branded smart debit card (a Visa card which will expand to other payment processors like MasterCard) that will help customers make and track purchases made online and in stores.
This move into the fintech space is not exactly new to the brand as Google launched a Wallet debit card in 2013 as an extension of its old payment app Google Wallet but shut the card down in 2016. However, there may be better chances of success this time, considering the following- Apples’ success with its credit card, people’s acceptance of software companies offering payment services and Google’s vast access to data which could allow it to accurately manage risks more efficiently than traditional financial institutions.
Google is experimenting in the checking account space according to the Wall Street Journal’s Peter Rudegeair and Liz Hoffman: “We’re 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 money in an FDIC or NCUA-insured account.”
With the debit card, users are able to add money or transfer funds out of their account from their connected Google app and use a fingerprint and PIN for account security. Once connected to their bank or credit union account, users could pay for purchases in retail stores with a physical Google debit card or with contactless payments by just holding it up to a card reader. A virtual version of the card that lives on a user’s phone can also be used for Bluetooth mobile payment and a virtual number can be used for online or in-app payments.
(READ MORE: Google building its own debit card)
This development from Google could be the beginning of a clear cut relationship with financial service providers and its customers seeing as the Big tech company already has a deep connection to consumers via apps, ads, search and with the Android operating system giving it more than a few ways to promote as well as integrate financial services. People around the world are being a lot more concerned about their finances amid the covid-19 pandemic, a debit card with more transparency and controls could be welcomed.
Big Tech companies eventually evolve into finance but why?
- Every company strives to better serve their consumers. Acknowledging this need and leveraging platform strategies through the integration of data, analytics and delivery platforms reduces friction and expands potential markets beyond what used to be the norm which could be considered more appealing to these consumers.
- These companies have a better chance of generating revenue from their transition into finance without actually becoming banks. Like with Google, they have just added banking and financial services without the headache of getting or maintaining a banking license, instead they will operate with already licensed partners CITI and Stanford Federal Credit Union.
- Big tech could and probably already deliver financial services better, they have the reliable infrastructure and the personalized data to back them after all, giving room to offer lower-cost or possibly free services, since they could use big data obtained through these services for a variety of other businesses.
Worthy of note is how tech in itself is under scrutiny now more than ever, as hackers and cybercriminals create havoc during this time of crisis. If tech companies strive for success and want to avoid the strict regulations and potential political intervention that comes with banking, they should consider the following.
- Pricing: Success in transition may be dependent on setting the right price on all sides of the new business model and building momentum through incentives that can scale easily.
- Trust is imperative when transitioning into finances. Consumers generally question anything and everything that concerns their finances.
- Building platforms in low margin businesses: The frequency of usage will determine your level of profits but it could be a vital element in ensuring success. Financial service providers who have low margins can find relief by offering higher-margin services beyond traditional banking products.