6 minute read
Cash Cheques
The implications of Google chequing
By Chris Harris
Big Tech’s entrance into payments came swiftly in 2019 with the introduction of Apple Card, as well as rising expectations that Amazon, Facebook and Google would also be looking for ways to play in the banking game.
Despite Apple Card’s big splash, Apple has not released, at press time, any numbers on growth. But Apple does not need to gain dominant market share to change the industry. That’s because there is something different about this credit card from the others on the market; it is the first to differentiate itself on user experience. This is reflected in Apple’s tag line “created by Apple, not a bank.”
Apple Card has redefined the process of applying for and using a credit card, and it has bridged the divide between a physical and digital card. Soon, all consumers will know this can be done and expect it from their financial institutions.
Enter “Cache” Now, Google is entering banking and appears poised to provide the same user-experience layer that Apple has provided with Apple Card. When Google “Cache” — the code name for the chequing account project — was announced in November 2019, the initial information provided was minimal. What we know is that Google is partnering with Citigroup and Stanford Federal Credit Union to provide smart chequing accounts in 2020.
CNBC reported that Google refers to its forthcoming offering as a “smart checking account,” but the details were left up to interpretation. But providing an experience layer means providing interactions for customers, and that’s something that should make financial institutions sit up and take notice. There are now two tech giants saying, “We can do this better than banks.” And at least two others are also potentially trying to disrupt this industry.
What will Google gain? Google’s potential gain from Cache remains speculative. But there are some likely insights we can pull from our knowledge of the company.
First, it is no secret that data is at the core of Google’s business model. From search to advertising, knowing how consumers think and behave is key to the company’s success.
One of the biggest gaps in Google’s data is how consumers spend their money. This data would allow the advertising giant to better target ads (and charge more for these ads) based on actual spending
behaviour. Google would then also have insight into the everyday transactions that occur through demand deposit accounts including deposits, transfers and bill pay, providing it with information on consumer expenses, how much money they hold and where they store funds.
Second, an additional benefit is that insights into personal accounts would help drive adoption of Google Pay. A survey conducted by Harris Poll on behalf of Ondot Systems found that 64 per cent of Americans would consider purchasing or applying for financial products from a tech company. Also, more than half of Americans (58 per cent) say if they purchased or applied for a financial product from a tech company, they would allow them to use their spending data.
Even if banks don’t go the way of BlackBerry and Nokia, this survey is a clear sign that financial institutions need to improve the user experience to keep and attract customers.
Will “Cache” go to Canada? Globally, it remains to be seen whether Google will offer “smart checking accounts” in other regions. Google Pay was released in the U.S. in 2015 and expanded to Canada in 2017, suggesting what might also happen with Cache.
Google currently holds over 90 per cent of the search market share in Canada and — if predictions regarding Google’s motivation to enter payments hold true — the company will see a huge opportunity to enter the Canadian payment space.
The Canadian banking market is an attractive target for FinTech companies and disruptive entrants like Google. Canada has more financial institutions than most developed nations, providing multiple potential clients, but is consolidated enough that it is approachable, compared to the over 10,000 financial institutions in the U.S.
Additionally, Canadians are quick to innovate, taking major implementation steps in the past year with Payments Canada’s payments modernization initiative. The potential ease of access to the Canadian banking system may be a welcome change for Google and its tech giant siblings. Regulation in the U.S., by contrast, is less flexible in how it’s interpreted, which can hinder innovative solutions to problems.
It is no longer a question of whether Big Tech is entering payments, but rather how quickly it will penetrate. It is essential for issuers of all sizes to ensure they are able to meet the increasing demands of today’s consumer.
FinTech partnerships are one opportunity for community issuers to retain their customers while staying up to date with escalating consumer expectations. Ondot Systems, for example, recently launched Card App at Money 20/20 in Las Vegas, Nev. Card App enables smaller banks and credit unions to offer an Apple-card like experience to their clients. Partnerships like this can serve as a template for how community issuers can provide gold-standard customer experiences on top of their existing infrastructure: without massive upfront investments.
Who will be on the new $5 note?
Canada’s currency continues to evolve with new bank note designs. And, following the success of the $10 Viola Desmond note, there will be a new $5 note that is planned to enter circulation in a few years.
The individual who will be portrayed on the new $5 note will be revealed later this year, drawn from public nominations. And, like the new $10 note (see July/August 2018 Payments Business), it too will have a vertical design.
The Bank of Canada ran a public consultation campaign for the new $5 note from January 29 to March 11, 2020.
“When we launched the last round of consultations, we never could have anticipated the enthusiasm of Canadians, both for the process or for the historic bank note that featured a Canadian woman for the first time, civil rights pioneer Viola Desmond,” said Minister of Finance Bill Morneau in a statement. “We’re excited to see who the public will nominate for the $5 bank note and look forward to celebrating another incredible Canadian.”
The nomination and selection process is similar to that which led to the redesigned $10 note, which won the Bank Note of the Year Award from the International Bank Note Society.
The $5 note nominees must have met all the following criteria:•
They are a Canadian by birth or naturalization who has •
demonstrated outstanding leadership, achievement or distinction in any field, benefiting the people of Canada or in the service of Canada; They have been deceased for at least 25 years (before March 11, •
1995); and They are not a fictional character.•
Participants can suggest images and symbols they associate with their nominee(s).
An independent advisory council composed of eminent people from academia, the cultural sector and civil society will review all nominations that have met the criteria. With the support of historical and public opinion research, the advisory council will develop a short list of candidates for submission to the Minister of Finance.
The minister will announce his decision on the portrait subject of the new $5 bank note before the end of this year. The Bank of Canada will then begin the design process for the new bank note. From the start of the public consultation campaign, it takes three to four years to design, produce and issue a new note.
Bank of Canada Governor Stephen Poloz encouraged Canadians from all parts of the country to nominate people who have inspired them and to talk about their achievements.
“This open call for nominations is another great opportunity to highlight the many stories of heroes, sometimes unsung ones, who have helped shape the Canada we live in today,” he noted. “I hope this process sparks conversations and encourages us all to learn more about our great country and its remarkable people.”
