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What if Google?

What if Google starts online bank? This question has been in my mind, but it seems like also some other peoples mind lately. If you ask me why they should do it, here are three reasons why Google should do it. And money is not the issue here.

  1. They have huge customer base
  2. They know us better than any other bank
  3. They have the most up to date systems

Ok, let's slice it. First, Google has millions of private customers, they have millions of SME's as customer, they have millions of corporates as customer. They already provide a bit like banking solution. If I put Google add to my own private homepage, I get paid. If I advertise my company online, I pay for Google. This means, they might have some kind of robust account system behind.

Secondly- Google just knows you lot better than your average bank. In basic bank, customer information is not consolidated in one place, but several independent places. Average bank is not one unit, but several units which hardly ever talk over bank silos. That is not the case for Google. To them customer is center point and products support customer.

Thirdly- average bank has legacy system inherited from 1970's. Google has most up to date IT systems. For them running banking worldwide is no brainer, but for average banks it is just too complicated.

Finally what they are missing is banking license. Should they get it or not, that is up to them to decide. If they do, there are several things what they still have to do, but should your average bank be worried. I say, hell yes!!

 

 

 

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Comments: (8)

A Finextra member
A Finextra member 14 January, 2011, 10:46Be the first to give this comment the thumbs up 0 likes

Yes, a debate of non-banking entities competing and possibly aggressively moving towards banking culture is always on. Paypal, Facebook, Wall Marts of the world have threatened legacy banks in their own turf.

I would be keen to get perspective as to : What will be the gains for customers? Will his life change? Will it improve “customer experience” at the web real state? In the long run, can these entities bring measurable and quantifiable benefits to the customer? Will these entities offer different product offerings than the existing banks? Will the online Banking transactions be carried on social media (assuming the risk factors) by these guys?

 

A Finextra member
A Finextra member 14 January, 2011, 13:01Be the first to give this comment the thumbs up 0 likes

That is so true. All the new banks have to offer something unique, why I should change my business to them.

For Google one thing could be interesting to offer. If Google operates in most of the countries, then they could, like all the teenagers always dream of, offering real time payment inside their bank. This could mean that one customer pays with Google account in India and same money is available to other customer in real time in Canada. If asked by youngsters, payment which takes one to three days to settle is dinosaurs from history. They compare this to SMS or Messenger services. But if you have one bank and one account system, it could be possible. 

A Finextra member
A Finextra member 17 January, 2011, 10:28Be the first to give this comment the thumbs up 0 likes

It's technically feasible, but...

For the customer, the issue would be one of trust - Eric Schmidt of Google has a habit of making cavalier statements about privacy. The same issue would dog any attempts by Facebook, et al.

For Google, the question is - why? Their core ad business is more profitable than banking. So, unless they can mine your transaction history to personalise ads (be careful what you pay for with that debit card!), there may be no clear rationale. And data mining returns you to the trust issue.

One way round the above would be an arms-length deal with (or purchase of) a bank where anonymised transaction data is used to allow the bank to display personalised Google ads.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 17 January, 2011, 14:12Be the first to give this comment the thumbs up 0 likes

For Google, such a step might be attractive since they've seen drastic reduction in growth projections of search business from a peak of 40% a year to 15-17% now. More details are available at

http://sketharaman.com/blog/2011/01/09/the-disintermediation-of-search/

But, I'm not sure why the customer should bother. Showing me search results is one thing, taking care of my money is quite another thing. Warts and all, banks are doing an okay job of the latter, so I wonder why customers should switch their accounts to "Google Bank". 

@Antti Larvala: Large MNC banks (ex: Citi) have been offering realtime cross-border retail payment transfers for several years now within their own branches across the world. So, I don't know if Google can do anything better there. However, if Google does the same thing between one of their branches and another branch of another bank, that would be great, but then I'm getting ahead of myself! 

 

 

 

A Finextra member
A Finextra member 18 January, 2011, 09:19Be the first to give this comment the thumbs up 0 likes

I would like to have a bank where I can transfer money around the world in a day. Citi is good example, but there is no Citibank in most of the world for retail banking. I was amazed how much money is transferred by Moneygram and other to developing countries from Europe or US. If there would be a bank, which would cover most of the world with it's network, that would dominate. But that is a dream. Still most of the people around the world, even in developed part of the world don't have a access to bank account.

Gregg Weintraub
Gregg Weintraub - State Street IMS - Princeton 20 January, 2011, 22:32Be the first to give this comment the thumbs up 0 likes

Have we all forgotten that banking is more than transactions?  Why would I believe that Google has any expertise in loaning money, controlling risk and making enough to create a profit and pay me interest to keep balances at Google Bank?  Cool and timely transaction processing services do not constitute a shrewd lending institution.  That doesn't even cover the question of whether Google wants to open themselves to the regulatory scrutiny that comes with being a bank.

A Finextra member
A Finextra member 21 January, 2011, 05:15Be the first to give this comment the thumbs up 0 likes

Great point Gregg. Anyhow I think debate seems to be in right direction.

And I was drawn to today's finextra news : “Google targets mobile money as key strategic priority”

http://www.finextra.com/news/fullstory.aspx?newsitemid=22183

A 360 degree view is needed on such discussions.

Shripad Vaidya, founder, Online Banking blog community

A Finextra member
A Finextra member 10 February, 2011, 16:17Be the first to give this comment the thumbs up 0 likes

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It’s an interesting concept but from experience we know that the barriers to success are high, so maybe they don’t have the appetite yet? Maybe when the Independent Commision on Banking options paper comes out in April we will see some new entrants. Google will have many hurdles to overcome with the FSA- data storage just being one. There is no doubt however that their pockets are deep enough so maybe the share of the mobile wallet will encourage a more detailed review

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