Google checking out offering checking accounts

Peter Rudegeair and Liz Hoffman from The Wall Street Journal:

Google will soon offer checking accounts to consumers, becoming the latest Silicon Valley heavyweight to push into finance.

The project, code-named Cache, is expected to launch next year with accounts run by Citigroup Inc. and a credit union at Stanford University, a tiny lender in Google’s backyard.

It appears Google is attempting to diversify its portfolio. Lately, other tech companies, namely, Apple and Facebook, have moved into the financial services sector. While more competition in the space should benefit consumers, Google has a significant amount of negative history that gives me pause when considering them for something as important as a checking account.

Specifically, Google has a track record of poor customer service, discontinuing products, and using data for advertising.

From what I can best recall, the first public issues of Google’s poor customer service began during their launch of the Nexus One. Their history of being unreachable seems cultural, as it continues today. Losing your Google account could be devastating, particularly for those who use Gmail as the reference email for every other service account. Some of us also use Google Photos to capture years of precious memories, Google Drive to store important documents and files, and Google Calendar to schedule our lives. Losing access to all this data in one fell swoop would be catastrophic. Can you trust an algorithm with your paycheck? What if such automation locked you out of your money when bills are due?

Google’s customer service reputation pales in comparison to Apple’s fantastic customer service. Whenever I recommend an Apple product to someone, even if the price is slightly higher than what they hoped to spend, I remind them of Apple’s customer service and the nearby Apple Store.

Next, Google has a lengthy history of discontinuing products. They have created and obsoleted more messaging platforms than any other company. The Verge has a great summary of Google’s woeful track record on messaging platforms. Their domination of RSS feed readers, only to ultimately discontinue Google Reader, still causes users pause today. This “bite me twice” caution with Google is most recently illustrated through critical reception of their cloud gaming platform Stadia:

“The biggest complaint most developers have with Stadia is the fear that Google is just going to cancel it,” Gwen Frey, developer of Stadia launch puzzle game Kine, told in recently published comments. “Nobody ever says, ‘Oh, it’s not going to work,’ or ‘Streaming isn’t the future.’ Everyone accepts that streaming is pretty much inevitable. The biggest concern with Stadia is that it might not exist.”

Google has unfortunately brought this unreliable reputation onto themselves. Their actions demonstrate what are seemingly short term considerations resulting in diminished long term product faith. It is somewhat ironic how this perception effectively obsoletes Google products before even Google themselves. Why use and invest your time into a product that will be sunset in the near future? Couple this perception with Google’s new checking platform. In my experience, people like to set up their checking accounts and unless something drastic happens, they are content to continue with the same credit union or bank. Their paychecks get deposited into their account, they pay bills using their account, they link their online payment systems to their account, they reference their spending history though their account.

Google needs to provide prospective customers a strong incentive to switch or even open an additional checking account.

Google executive Caesar Sengupta told the WSJ that the initiative is designed to “help more people do more stuff in a digital way online,” and he noted that the service could be used to offer loyalty card programs.

Do what sort of more stuff? I can’t think of anything I want to do with my checking account online that I cannot already do. And who wants loyalty card programs enough to switch to Google’s new checking account platform? Why can’t those loyalty card programs be done without a new checking account platform? What incentive will Google offer to get people to initially switch to them and will that incentive overcome the inherent long term fear people have with Google products?

I remember when Google launched Gmail. At the time, Gmail’s storage limit of 1 GB was unreal. It blew every other email provider’s storage limits of around 2 MB out of the water. People rushed to switch to Gmail. I can recall Gmail invites selling for a fair amount of money on eBay. Convincing people to switch email addresses is a major ask. It has similar pain points to switching checking accounts. Frankly, because it’s so forward facing, changing email addresses can be even more arduous than switching checking accounts. Google needs to do something similar with their checking accounts. Perhaps offering such a high interest rate that similarly gets people as excited as 1 GB of email storage would do the trick. I do not believe a loyalty card program will generate as much excitement.

Finally, Google is a data driven ad company. Selling ads is its very soul. Google claims they won’t sell checking account data to advertisers, citing the fact Google Pay already exists in such a manner. That could very well remain true. But I cannot imagine a world where Google, a data driven ad company, ignores the financial data it can now compile through your checking account. While they may not sell this data to others, I assume Google will use that data to advertise to its users. How is this approach beneficial to users? Are loyalty cards enough of an incentive to receive these ads?

Notably, checking account data shows where users are already spending their money. It is concrete financial data. This incredibly valuable financial data reduces friction in generating revenue. There’s less of a guess whether people will be merely interested enough to click an ad or click an ad and buy the advertised product. Combine this financial data with Google’s voluminous treasure trove of data they already have on you and you have a stronger ad approach. Why advertise a $500 coffee machine to someone who has $200 in their checking account and never spends a dime on coffee? Here, Google might instead advertise a $10 tea pot.

We are becoming increasingly aware of the importance of privacy, our data, and how technology companies have a hand in nearly everything. Considering the above three factors, should Google want its checking platform to succeed, it must overcome these difficult hurdles. They need to bolster their customer support, build consumer trust, and create a strong incentive to joining. I look forward to checking out, on the sidelines, how they continue to build out this venture and other, possible financial services.