Google’s newly announced checking account service could aid banks in their battle for consumer deposits, as digital-only banks lure away customers with friendly mobile apps and higher interest rates.
The technology giant last week said it is partnering with Citigroup and Stanford Federal. The move could help U.S. financial institutions retain customers or add new ones as the industry contends with slowing growth in deposits amid rising competition from digital-only banks, analysts say.
The growth at the biggest U.S. banks slowed to 2.2 percent last year, the lowest level recorded since 2010, according to data compiled by Bloomberg Intelligence. Consumers have flocked to newer, digital-only banks at an increasing pace, as digital banks offer flashy mobile apps and sometimes higher interest rates for their savings.
As Citigroup debuted its national digital bank and restructured its U.S. consumer operations last year, it brought Anand Selva from its Asia business to lead the new unit. Average deposits in the firm’s U.S. retail banking arm have climbed 2.9 percent this year to $186 billion.
Citigroup’s partnership with Google could mark another major milestone for Selva, who has likely gained insights from the firm’s partnerships with Paytm and Grab in Asia. Paytm is India’s largest payment platform while Grab is Southeast Asia’s dominant ride-hailing app.
Similar to how airlines act as an account acquisition tool for credit cards, banks would be using Alphabet’s Google as a way to add customers, said Betsy Graseck, an analyst at Morgan Stanley in a research note. This is not attaching your current checking account to Google Pay. It must be a new checking account, she wrote.
For Google, the bank partnerships will give the tech giant bigger muscles to show advertisers how marketing dollars spent on its system can drive purchases, notes Graseck. In a Morgan Stanley survey, consumers expressed high levels of confidence in Google’s ability to offer banking services, she said.