Despite the Google Plex checking accounts being heralded as the most significant sign of technology companies moving to usurp the primary account relationship from retail banks, Google has announced it is abandoning such plans to focus on delivering digital enablement for banks and other financial services providers.
In 2020, Google announced the launch of the Plex accounts that involved partnering with eight banking providers across the US including Citibank, Stanford Federal Credit Union, Bank Mobile, BBVA USA, BMO Harris, and First Independence Bank.
The partnership would allow traditional banks to offer banking services in collaboration with Google via the revamped Google Pay app, which would have new checking account features integrated. Google would have focused on the interface design and technological aspects of the offering, with the partnering banks handling the back-end processes and systems that require banking licenses.
A watershed moment
The prospect of one of the most successful technology companies entering the retail banking sector was a significant milestone for the industry. Previously, technology companies had merely flirted with applying for industrial banking charters before being shut out by risk-averse regulators wary of anti-trust and monopoly consequences. Resultantly, the anticipation for a serious offering by a behemoth such as Google was a watershed moment, one that led to approximately 400,000 US customers signing up to the offering’s waiting list.
More broadly, preference for services from Google, given its degree of digital sophistication and reliability, led to almost one in five consumers in the US being receptive to opening a Plex account. Preference increased to 33% for customers who use a digital wallet from a Big Tech provider, according to a Cornerstone Advisors survey of 3,898 US consumers in December 2020.
However, despite Google being best placed to enter and capture significant amounts of market share, the departure of key personnel and multiple missed deadlines have been cited as the causes for shelving the program less than a year into launch. Caesar Sengupta, the project’s architect, left Google in April 2021, and the continuation of the Plex program was perceived by executives to compete too closely with banks at a time when they are the primary customer base Google sell their cloud and other technological solutions to.
Google strategy: to connect the unbanked and underbanked with banking providers
While digitally-minded customers will likely be disheartened about Google moving away from offering checking accounts, this is unlikely to be the final page of Google’s story in financial services, as its strategy remains to connect unbanked and underbanked customers with financial services providers. This is likely to continue in a more indirect manner than many would have expected, but as its history in financial services and payments shows, it is entirely possible that a more direct approach is revisited when the timing, regulatory environment, and demand for such services align.
Data from GlobalData’s 2021 Financial Services Consumer Survey shows that between 2020 and 2021, preference for a transaction or savings account from a Big Tech/digital wallet provider increased by five percentage points for customers in the US, preference likely augmented by the shift to digital channels and platforms during the COVID-19 pandemic.
Digital-only banks saw preference slightly decrease, a worrying sign given they were unable to take advantage of the digital-friendly environment many would have expected them to thrive in. Consequently, the big winners of the past year have been Big Tech/digital wallet providers, who saw the greatest increase in preference for transaction and saving accounts, followed by digital investment and brokerage platforms such as Robinhood.
This article was written by Mohammed Hasan, Associate Analyst, GlobalData