If you can’t beat them, join them.
- Google’s move into banking with Citigroup makes complete sense because, as Facebook found, the vested interests in the banking sector will do whatever it takes to prevent disruption.
- The banking system as it exists to today is not fit for purpose.
- Despite massive consumer digitisation, it is still slow, overly bureaucratic, expensive and cumbersome to send money through the global banking system.
- Transactions which should already be frictionless and instantaneous are often taxed by multiple handlers and take days to complete.
- This is an industry that is riper for disruption than any other and yet all attempts to force it to modernise have failed.
- Facebook’s Libra project was the latest attempt to fail and while there were certainly issues that needed to be addressed, I think that this one had real potential.
- Given the right protections for consumers, I think that Libra could have been extremely successful but clearly, the banks and payment companies saw this as an existential threat to the gravy train.
- This, I suspect, was the main reason why there was so much horror and dismay from politicians and regulators when Libra launched in June of this year.
- Following what must have been serious heat from banks and politicians, all of the really key players pulled their backing from Libra, leaving it floundering and unlikely to go anywhere.
- This, I suspect, is a big reason why Google made the decision to enter financial services in partnership with one of the same vested interests that may have had a hand in Libra’s demise.
- Google’s move is in conjunction with Citigroup and aims to offer fully functional checking accounts to its users which will be managed by Citigroup and a small credit union based out of Stanford University in Palo Alto.
- Going with Citigroup is a shrewd move by Google.
- First, vested interests: Citigroup is one of the vested interests whose livelihood is deeply threatened by mobile and internet banking.
- A partnership with Google ensures that it will have a seat at the table, as well as a head-start when the Internet finally breaks through into the financial services sector.
- Google gets protection from the same pressures that sank Libra, as it can point to Citigroup as the manager of these services to quell the usual safety, security, compliance accusations that come from those who fear its impact.
- Second, infrastructure: Consumer banking is a messy, complicated and regulation infested industry.
- This means that Google will not have to build the systems and processes required and jump through all the hoops but instead, can pretty much hit the ground running.
- This is how it can be in a position for the offering to go live sometime next year.
- There is likely to be opposition to this from the other vested interests as well as from regulators who are already concerned that big tech has too much power, but at the end of the day it should be for the user to decide whether he wants to go with Google or not.
- The banking sector badly needs to be brought into the digital age and with the regulatory environment, partnerships look to be the most likely route to success.
- This is a very long-term strategy for Google and I would not expect any real financial impact for some time, even if it proves popular.
- I remain fairly ambivalent to Google’s shares as the rosy outlook looks to me to be fairly reflected in the share price.
- Hence, I continue to hold Samsung in my portfolio as my top choice in this sector.
