Why Google’s Deal With Citi Isn’t About Becoming A Bank (But Is Still A Big Deal)

It was the gasp heard ’round the world last week.

Google confirmed that it will partner with Citi and Stanford Federal Credit Union to launch a checking account linked to Google Pay sometime next year.

Media outlets and pundits have chalked this up to Google doing what every other ecosystem player wants to do: finding new ways to keep consumers inside the Google ecosystem and monetize those interactions.

I think it’s more than that.

Cache, reportedly the project’s code name, is described by Google as a “smart” DDA.

Smart, according to Google, because it will provide its checking accountholders with money management tips to optimize and manage the funds in those accounts – funds linked to payments and identity credentials that consumers can use to buy things, pay bills and send money to others in and outside the Google ecosystem.

Smart, too, because instead of trying to be the bank, Google is leveraging the brand name, banking infrastructure and reputation for trust and stability of two banks, one of which is among the world’s largest global financial institutions, to acquire new users for that product and for Google Pay.

Smart, because if successful, these accounts could become the cornerstone for the everyday app ecosystem that every Big Tech and FinTech player has its sights set on developing – which WeChat and Alipay have already created with great success in China.

Project Cache seems intent not to make Google a bank, but to use banks, starting with these two, to leapfrog their Big Tech and FinTech competitors and gain the consumer’s trust for keeping their funds safe. Project Cache will move the management of consumers’ separate financial services, banking, payments, investments, commerce, messaging, entertainment, offers, media and information apps into an app powered by Google’s ecosystem.

If successful, this ecosystem would link payments, banking, identity and commerce credentials to a funding source that does something no other FinTech or Big Tech ecosystem has been able to do at scale: capture the consumer’s primary paycheck and use it as the flywheel to make funds movement between those various ecosystem endpoints seamless, trusted and secure.

Google’s Everyday App Opportunity

Google comes to this everyday app ecosystem party with a mixed bag of potential.

Today, many consumers live – and even work – inside of the Google ecosystem.

According to Comscore’s September 2019 rankings, in the U.S., there were 258 million unique monthly visitors to Google sites across desktop and mobile channels, versus 209 million to Amazon sites, 219 million to Facebook sites and 161 million to Apple’s. In addition to search, for which there are nearly six billion Google queries every day, Google operates a variety of utilities that consumers use regularly on both iOS and Android devices, as well as their Windows and Apple desktops – Google Maps, Waze, YouTube, Gmail and Google Drive, to name a few. Chrome, Google’s search app, surpassed five billion downloads in June of 2019 across both the Android and iOS ecosystems. Google’s Android operating system in the U.S. has a 51 percent market share, according to Statista, as compared to Apple’s 48 percent share as of October 2019.

If usage stats are a measure of satisfaction, it would certainly appear that consumers like being part of the Google ecosystem, despite what the media, lawmakers and regulators might want us to believe.

With everyday usage and familiarity has come a certain level of consumer trust in Google as an enabler of new, connected commerce experiences. The results of several PYMNTS studies over the last year seem to support this idea.

As we reported in early September as part of our annual How We Will Pay study done in collaboration with Visa, Google ranks No. 6 behind Visa, PayPal, Amazon, Mastercard and the consumer’s existing bank as the player consumers trust to enable an innovative, connected purchasing experience. Facebook ranks dead last in a list of two dozen or so FinTech, Big Tech and merchant brands – and has for the last three years.

According to that same study, among bridge millennials, the consumer group between the ages of 30 and 40 who represent the first generation of connected consumers with buying power, Google rises to No. 4, ahead of PayPal and Amazon. With Facebook, still, dead last.

In July of 2019, PYMNTS released its own study of U.S. consumers and their interest in using an everyday app – a concept that for most U.S. consumers is somewhat unfamiliar right now.

As part of that study, we described what an everyday app could do for a consumer: provide a single doorway into a variety of features and functions that help consumers manage their everyday activities. We took a rather broad view of that, which included keeping tabs on their money, their spending and how and where they make purchases as well as managing their appointments, messages, bill pay reminders and more.

More than half of all consumers (54 percent) said they would be interested, with a third saying they have a strong interest in such a concept.

When asked who consumers would trust to deliver that experience, Google ranked fourth, behind PayPal and Amazon and in between Walmart and Apple. And again, Facebook was way behind.

Perhaps even more interesting are the results of a study PYMNTS did last spring in collaboration with Green Dot on consumers’ satisfaction with their bank and their level of interest in exploring banking alternatives from a wide range of non-traditional players.

For that study, PYMNTS asked consumers to describe what “banking services” means to them and from whom they’d like to receive those services if they were to move away from their current FI. On that list, we included familiar merchant brands like Walmart and Target, apps like Uber, payment providers like PayPal, and Big Tech players like Apple, Amazon, Facebook and Google.

What we discovered was that consumers, overall, have a high degree of satisfaction with their current financial institutions, with 88 percent saying they trust their bank and would be unwilling to switch to an alternative. In that study, we found that consumers see basic banking services as consisting of a checking account where funds can be deposited and held until used, along with a debit product that provides a way to access and spend those funds.

We also found that most consumers feel as though banks “have their backs,” and trust them to keep their funds secure and meet their needs with basic banking services.

That said, roughly a third of all consumers in that study said they might consider switching away from their current financial institution to a provider whose core business isn’t banking, as long as the right features and functions were offered.

Consumers identified over 30 different consumer brands from many different segments, including retail, technology and payments brands that could be candidates for that shift. The brands that came out on top were PayPal (35 percent), Amazon (25 percent), Walmart (18 percent), Google (15 percent) and Apple (13 percent). Facebook, again, falls way behind.

Net-net, although Google is consistently ranked as one of the top five to six providers in all of the studies we have done, they are not in the top one, two or three when it comes to being considered a provider of financial services or an enabler of the everyday app/ecosystem experience. Others consistently place higher on those lists – and in some cases, much higher.

Google’s Everyday App Challenge

These results, collectively, suggest a few things.

Consumers like living in the Google ecosystem and use their apps a lot. But that usage of the Google ecosystem, broadly – and Google Pay, specifically – hasn’t yet translated to Google’s opportunity to play the role of a more strategic everyday app or financial services provider for consumers.

Part of the reason may be that the more innovative, contextual commerce experiences Google has recently linked to Google Pay are still too new, and not widely adopted enough, to be captured in these survey results. For example, Google’s connected commerce experiences via Google Flights, Maps and Waze; its integration with Olo to enable food orders from 70,000 restaurants; and the revamp of Google Shopping are recently enabled experiences that consumers may still be getting familiar with.

Part of that could be the lack of connective tissue provided to consumers by voice – and, in Google’s case, supplied by Google Assistant. Recent reports show Google has lost ground to Amazon and Echo in the smart speaker race, which means Google is losing traction in the voice assistant race as well. Voice, while still nascent as a commerce and financial services enabler, will play an important role in driving consumer usage of and demand for a growing range of experiences, including an everyday app-like experience.

But I suspect that a big part of how these rankings shake out could be how consumers compartmentalize Google and use it to conduct their payments, banking and commerce activities.

Consumers may go to Google to search for what to buy, find a site that has what they need and then punch through to buy it on that site using a set of credentials they have stored there, or via a buy button that makes checkout efficient. Which is probably not Google Pay.

Consumers may watch YouTube and not buy anything at all, simply using it as a place to watch cool videos and endure the ads.

They may store payments credentials in Chrome, but don’t connect that to Google Pay or Google as a commerce or payments enabler when storing and using those credentials.

Consumers may get reminders for bills to pay via Gmail and then go to their online banking site or to their mobile app to pay them.

Now contrast that with how consumers today use PayPal, Walmart and Amazon – which, from the consumer’s standpoint, consistently place ahead of Google as a trusted innovator in payments, financial services and commerce.

Consumers today use both PayPal and Walmart as much more than just payments credentials. Based on the last PYMNTS study of the gig economy, more than a third of gig workers in the U.S. have their gig pay deposited into their PayPal accounts. Consumers can use PayPal to store funds, pay bills, shop, and save and manage their money, much as they would any other bank account.

Consumers use Walmart in a very similar way: to send and receive funds, buy groceries, pay bills and shop for clothes, toys and electronics – and now, to manage their healthcare and prescription services.

Amazon’s ecosystem now includes access to a variety of everyday spend products, including groceries, prescriptions and, soon, healthcare, along with fashion items such as designer labels. Amazon has an expanding roster of digital content, including live sporting events. And Alexa – which leads the voice assistant market by a wide margin – is used by consumers to order products, food and other services, as well as to check their bank account balances and pay bills.

In each of those scenarios, consumers are fully aware that they are engaging with Amazon, Walmart or PayPal to complete their transactions, end to end. And when they do, consumers associate that engagement as being very much tied to that named, branded and specific ecosystem.

That’s not how it is today with consumers and Google. Even though consumers may be engaging with Google apps outside of Google Play, consumers haven’t connected the dots – or been given the chance to connect them – to a seamless payments, banking or commerce experience powered by Google.

The question for Google, and for the two banks it has partnered with, is whether connecting its ecosystem to their primary paycheck – the one thing that starts the financial services, banking, payments and commerce flywheel – will help consumers more effectively make that connection.

Who Will Fill That Everyday App Gap?

When I first wrote about the notion of an everyday app for U.S. consumers, I created a framework that identified the key activities any contender must satisfy to occupy the pole position.

An everyday app ecosystem, like the ones WeChat and Alipay have created, had to not only enable funds in and out, but also had to provide tools for users to manage those funds, receive offers, find and buy products and services across a variety of channels and payment methods, pay bills, receive reminders and alerts, and access a variety of digital media and content.

All while making it easy for others to become a part of that ecosystem – just like WeChat and Alipay have done with their mini apps.

All of this seemed a tough order to fill, since no single U.S. player today has all of those capabilities. So Big Tech and FinTech players with everyday app ambitions have used their specific areas of strength and user engagement to gain momentum and then chip away at filling the gaps in their own ecosystems through partnerships, APIs and other methods.

But no single player has been able to convince the majority of U.S. consumers that having their primary paycheck deposited anywhere but their primary bank is a great idea. Nor has anyone successfully built a seamless bridge between the payments, identity and commerce credentials consumers use inside of one ecosystem and that precious funding source that consumers trust to their banks.

It’s obviously the card that Google – with Citi and Stanford Federal Credit Union as partners – says they will play next year.

Google and Citi each stand to win if consumers agree that having a new Google bank account at Citi can help them optimize their spend, manage their money and keep those funds safe until they are used. And if they trust Google and their bank partners to enable that end-to-end, everyday app ecosystem experience.

Citi stands to win by playing the role of that everyday app ecosystem bridge – adding deposits to a retail banking portfolio that, for them, has remained largely flat. Citi also stands to win by aligning with a consumer and merchant ecosystem that is massive – and global – in digital and mobile, and using it to upsell and cross-sell other banking products and services. Consumers could win, too, if the combination of Google and Citi can enable more optimized, relevant and dynamic spending options that save them time, money and friction.

Google’s announcement with Citi also comes with a number of unknowns.

For the banks who are part of the launch, is the deal with Citi and Stanford Federal Credit Union exclusive? And if so, for how long? If not, will more banking partners be added to the mix?

For the payments ecosystem, could the combination of Google and Citi become an existential threat to the existing payments rails if Project Cache gains steam? One possibility is that Citi and Google Pay could become a new set of payments rails that uses the DDA to pay merchants directly, while sidestepping the traditional card rails. Could that be the first attempt, at scale, for RTP rails to enable those transactions between consumers and the companies they do business with?

Don’t forget that in the spring, Citi will launch Spring, a gateway that will enable digital payments acceptance for their international merchant clients. The timing on that launch seems anything but coincidental, and could also disrupt the existing merchant services ecosystem.

For the global and domestic players outside of the U.S., how long before this partnership moves out of the U.S. and goes global, where Citi has a strong international retail banking presence and Google Pay has strong payments ambitions?

For consumers, is the combination of Citi with Google an on-ramp for the everyday app ecosystem that has, as yet, remained elusive in the U.S.? To be successful, consumers will need an account with Citi or Stanford Federal Credit Union, and switching bank accounts is never easy for consumers to do. Will the value proposition be strong enough for consumers to make the switch? Or are consumers more comfortable living in an ecosystem like Amazon with Alexa, where skills and their voices provide that on-ramp and access to existing banking relationships?

And can the combination of Citi with Google make it easier for consumers to trust transacting in an everyday app ecosystem powered by Google?

Last but certainly not least, given all the recent hoopla, one has to wonder whether Facebook has a plausible strategy for entering this fight. The irony of this announcement is that WeChat evolved out of a social network that today claims about a billion active users as part of its ecosystem. Messenger was positioned several years ago with chatbots to be that everyday app, then Libra a few months ago as a new network to do the same for the billions of underserved. And now Facebook Pay, which is positioned as a single sign-on with registered payments credentials across all of Facebook’s properties, could be the doorway into an ecosystem where everyday activities, including payments and commerce, can be managed.

Creating crypto-based rails and wallets to lift billions of dirt-poor consumers will always sound much sexier than a Big Tech player making a deal with a 200-year-old bank to link a basic banking service like a checking account to digital payments and identity credentials and an ecosystem that consumers use and like today to go about their day-to-day activities.

Of the two, my bet is on boring.