19 December 2014

Why Google Bank won't happen

30 July 2014  |  14626 views  |  8 Man pointing on world Icon

Google won't launch a traditional bank because of the associated costs and regulation, but these hurdles won't stop the firm from redefining the future of financial services, according to a new Forrester report.

The report, written by Forrester analyst Oliwia Berdak, postulates that Google will likely become a financial services hub that facilitates the relationship between the consumers and providers of financial services, causing disruption in four areas: payments, money management, product comparisons, and financial advice.

"Google's reputation as one of the most disruptive firms in the market, have left many digital financial services executives worried about a potential new rival: Google Bank," writes Berdak, in a blog post. "Unfortunately, they're asking the wrong questions."

Google's forays into mobile payments have so far yielded less than stellar results, with its Android-powered Wallet undergoing multiple iterations in an effort to gain some traction with consumers.

Forrester maintains that the future of Google's mobile payment services lies in the integration and leverage of other product lines such as Google Maps, Gmail, Google Play, and Google Now. In fact, Forrester sees Google focusing less on in-store payments and more on building a comprehensive digital wallet for every stage of the purchasing journey.

"In retail financial services, developing a better global payment network, providing affordable financial advice that millions of customers desperately need or simply getting access to transaction data are all sufficient motivations for firms like Google to get involved," says Berdack. "For a firm that uses information to solve problems, a logical next step is to use product, consumer and transaction data to deliver financial advice and tailored product recommendations. Google won't become a bank - it's not another bank that people want - but it could easily become a financial services hub to facilitate the relationship between consumers and providers of financial services."

Comments: (8)

David Brear - Previously Infosys, Lloyds Banking Group and Aviva - London | 30 July, 2014, 11:38

I think this has some good thought behind it but i just dont see this happening with Google.

 

The pieces i think that are correct for me are that the people who will come and start to take chunks of revenue, data and potential away from banks will not be other banks but people around the edges of banking and those who can extend what it means to 'bank' to its potential.

 

This is unlikely, in their current state, to be the traditional banks due to the processes, systems, culture and general despisition that has been ingrained over years of thinking and acting in certain ways.

 

Whats its safe to say is that new technology ever increasing and particulary in the mobile, connectivity and data exchange spaces mean that the barrier to nibble at banks revenue models is becoming lower by the day!!

 

The banks who are evolving to understand and work with this are the ones that will be successful in my opinion.

 

As far as Google goes they are a great company doing great things but I just don’t see them doing it. This is to say I wouldn’t expect that one company will come in and dominate the space but that many people will be able to leverage technology and data to bring things to the market that banks just couldn’t do. Reasonably ironically I think the thing that would be the killer to a Google Bank would be Android but that’s for another day. 

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Gerard Hergenroeder - IBM - New York | 30 July, 2014, 14:27

I agree with the author. Why would Google or Facebook want to become a bank? It is too costly and would hurt their stock price. They came get the best of both worlds by continuing to disrupt the retail and payments value chains.

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Chris Yaldezian - IBM (Software Group) - San Ramon | 30 July, 2014, 20:22

No Apple bank either. 

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Hugo Cuevas-Mohr - Mohr World Consulting - IMTC - Miami | 30 July, 2014, 21:53

No Walmart or Amazon Bank either. They want to offer transactional services in order to better serve their clients but the world of banking is too complex and regulatory pressures are not helping the sector. Banks are trying to compete with transactional services like money transfers but I don't think they will be succesful while all these companies, telcos, retail, technology, can do a much better job with P2P services, leaving the world of Banks to Companies, B2B.

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Richard Hamerton-Stove - Infosys - London | 31 July, 2014, 16:38

A good post, decent article and interesting comments.

Google Bank? Nope. There is no need. The whole value chain of banking services is fragmenting by the day and there is no need to become a bank in order to take away profit from the hitherto protected banking sector.

The end state for payments is for an intelligent assistant (could be wallet, could be something else) will optimise your purchases by combining preferences, cash, credit, airmiles, time of day, location etc. Google will be great at this and their Wallet may evolve to be that assistant.

Pure financial advice (savings advice/investments etc.) is an altogether different kettle of fish. The regulations are onerous, not at all customer centric and implemented in a ham-fisted way that simply begs for change. I suppose Google could let you know that spending all that money now will mean you'll end up over-drawn next month but I'd rather just get the loan and live with it. Wonga-lite anyone?

 

 

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A Finextra member | 01 August, 2014, 11:00

I think you need to look at it from a data need perspective and what Google has and what they need.

At present they have a huge amount of visitor online search and view data, they have a huge amount of customer online buying data, they have purchased Nest and will soon have a large amount of customer home usage data... what key customer habit are they missing?

I would say a key piece is offline spend data... how can they get hold of that data to give a full picture of customer buying habits both online and offline? One way would be to become a bank... but there are other ways and this I imagine is what Google is trying to find the best way.

I would say "dont say never to Google becoming a bank" but if there is no other way of them getting the data they want, I wouldnt mind betting it would be a consideration. One thing is for certain, their big enough to try.

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Chris Yaldezian - IBM (Software Group) - San Ramon | 01 August, 2014, 19:15

Good article that has fostered good comments. Okay, I won't say "never" about Google or Apple not becoming banks, but right now, why bother. They don't need to be a bank, to provide the front-end to banking; provide the user experience, collect the data, and pick up fees from 3rd parties wanting access to their front-end.  They will let the banks handle the rails, the risk and the setlement, but they will have the customer and that is what will really matter.

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Timm Rüger - Timm Rueger IT Consulting EOOD - Sofia | 13 October, 2014, 21:19

I ask myself what a retail bank is if it does not provide payment services and a transaction history. From a client perspective Google IS already a bank. 

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