INTERVIEW
SHOULD YOU BANK
WITH GOOGLE?
Tech companies may offer better deals than
traditional banks. But there’s a trade-off.
Daniel Latimore is a senior
vice president for banking
at research and consulting
firm Celent.
Why are Apple, Google, Face-
book and other tech companies
interested in offering banking
and financial services? It’s not
that banking is where the
money is, but rather that
banking is where the data
is. Big tech has grown by
monetizing data. By offer-
ing a checking account,
credit card or other finan-
cial product, these compa-
nies can gather specific and
detailed information about
your income, spending, cash
f low and other financial
habits.
Are the tech firms really be-
coming banks? For now, they
are wading into specific
parts of financial services
and generally partnering
with existing financial in-
stitutions. For example,
Google will soon offer
checking accounts in part-
nership with Citigroup and
Stanford Federal Credit
Union. Often, the tech com-
pany will be the brand that
the customer sees while the
bank takes on regulatory
issues and other behind-
the-scenes tasks. In time,
some tech companies may
move further into financial
services but will likely stop
short of crossing lines that
require them to deal with
regulatory complexity and
compliance.What are the potential bene-
fits for consumers? Tech
companies will likely offer
lower fees and higher inter-
est rates than traditional
banks. Some may offer cash
incentives or other perks
to encourage customers
to make the switch. Many
are also focused on
offering a bet-
ter customer
experience by
offering apps
that are easy
to use, making
it easier to find
the informa-
tion you need
within an app,
and figuring
out the right
way and time
to connect
with you to
be useful but
not annoying.
As these com-
panies get to
know customers
better, they’ll
start giving
them person-
alized offers.
For example,
if they know
how much
you’re paying
on a mortgage,
they may infer therate and offer you a refi-
nance option with a lower
rate through a partner.What are the trade-offs? You
are giving the tech company
your financial data. They’ll
see how much money you
have in your account, what
bills you’re paying and
more—and they’ll use that
information to try to sellyou stuff and market finan-
cial products. Customers
who are concerned about
their privacy may want to
use a diverse portfolio of
service providers—keeping
social accounts in one
bucket, banking in another
and investments in a third—
to avoid giving a single com-
pany a full view of their
affairs. There are also a
lot of boring but important
functions that traditional
banks do well, such as
maintaining branch loca-
tions and call centers, that
aren’t always a strong suit
for technology companies.Will people make the switch?
Inertia is the most power-
ful force in consumer fi-
nance. Getting people
to change unless
there’s a big
shock is tough.
And for a sig-
nificant por-
tion of the
population,
the brand re-
ally matters
in financial
services. If
you want to
give the new
accounts a try,
you might con-
sider opening
one as a second-
ary account. If
over time you
receive offers
that would save
you money and
you don’t mind
how your data
is being used,
you might con-
sider making it
your primary
account.
KAITLIN PITSKERPHOTOGRAPH BY ADAM DETOUR
KIPLINGER’S PERSONAL FINANCE 11