Google has signed up a further six US banks to support the companies strategy to move into digital banking.
The new partners — BankMobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank, and SEFCU — join Citigroup and small lender Stanford Federal Credit Union, which Google announced as partners in November 2019.
As with the other deals, Google will provide the front-end user experiences of the digital banking services it provides, while its FDIC-backed bank partners will hold the accounts behind those services.
Unlike neobanks that tend to downplay sponsor banks in favour of pushing their own brand, Google will cobrand its banking services with its partners.
Partner banks will benefit from greater visibility and Google’s tech capabilities. A cobranded offering means partner banks will be able to grow their account numbers through the Google collaboration without forfeiting too much visibility among customers.
This does mean less control over the client relationship, as the consumer-facing front end will be under Google’s control. But that is actually an advantage for its smaller partners, since they likely have nowhere near Google’s UX-design capabilities.
Prominent cobranding will allow Google to piggyback on its partners’ perceived stability and reliability as incumbent banks. This could assuage the doubts of prospective customers who are unsure whether they are comfortable taking out bank accounts with a big tech company that is otherwise unproven in the financial space.
The companies that will take the biggest hit if Google is able to launch a successful digital banking play will be digitally native neobanks. Challenger bank strengths lies in their technological capabilities, which they are leveraging to draw in customers and gain scale, although profitability remains a significant challenge, especially after consumers flocked to larger banks during the pandemic.
However, if those neobanks end up in direct competition with a big tech company like Google — which has scale, profitability, and vast technological prowess — they will be robbed of that advantage, endangering their future prospects.
Another hazard will be that as Google works to create in-demand digital banking features, it will likely look to popular neobank features for inspiration, releasing its own versions and reducing the competitive uniqueness of those features.