Oct
19
“There is nothing permanent except change,” declared sixth century BCE Greek philosopher Heraclitus. I would venture to say that modern society agrees with him, as evidenced by an abundance of expressions hinting that there is wisdom in making the most of change, and naught but folly in attempting to slow or stop it. For instance:
- Aviator Betty Green quipped, “Bending beats breaking.”
- UK Prime Minister Harold Wilson said, “The only human institution which rejects progress is the cemetery.”
- Trekkies gleefully quote the infamous Borg’s “Resistance is futile.”
- And we have history’s most prolific commentator, Anonymous, to thank for “If you can’t beat ’em, join ’em.”
In Darwinian terms, the financial services industry is a model of survival via adaptation, inventing and re-inventing itself through centuries of cultural, legal, and technological change. Readers may have noticed that Wells Fargo didn’t disappear when the great California Gold Rush of 1849 subsided in 1855, JP Morgan Chase is no longer a waterworks, and my employer Fiserv has moved well beyond its roots as a data processing company only.
Love thy enemy?
At first, the banking industry sounded alarms as fintechs proliferated and tech giants such as Google, Facebook, and Apple dangled their toes in financial services waters. They were, to put it bluntly, The Enemy.
Now, although cautions remain, alarms are fading with the realization that The Enemy’s continued incursion is unstoppable. And if that is so, the wiser tactic may not be to fight but to embrace. That is, to turn The Enemy into an asset.
This seems to be especially true for smaller institutions. Finn AI CEO Jake Tyler recently wrote for The Financial Brand,
A partnership with the big tech powerhouse could enable community banks and credit unions to offer a sophisticated digital experience quickly, including an alternative to Apple Pay … When Google announced that it had partnered with six more banks and credit unions on a checking account—in addition to its original two partners—it had many in the banking and fintech space scratching their heads … [but] Google has more than 67 million Google Pay customers, which could give its banking partners access to a huge potential customer base. It could also allow them to offer consumers a digitally focused experience, something that many traditional financial institutions—notably smaller banks and credit unions—struggle with.
But partnering with tech firms needn’t be the exclusive domain of tiny institutions. Just last month, Finextra reported on Google’s plans to provide co-branded accounts via eight US banks of varying size in terms of assets, including Bank Mobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank, and SEFCU.
Moreover, if you have an Amazon Rewards Visa credit card, you probably know that it’s really a co-branded Chase card. As I noted in March, Goldman Sachs is partnering with Apple on the—what else would it be called?—Apple Card. And nearly a year ago, PYMNTS.com reported that Google had “… announced it will partner with Citigroup and Stanford Federal Credit Union to launch consumer checking accounts.”
Yet, PYMNTS.com argued elsewhere, “… instead of trying to be the bank, Google is leveraging the brand name, banking infrastructure and reputation for trust and stability of two banks.” The article, by Market Platform Dynamics CEO Karen Webster, continues:
[I]f successful, these accounts could become the cornerstone for the everyday app ecosystem that every Big Tech and FinTech player has its sights set on developing … to leapfrog their Big Tech and FinTech competitors and gain the consumer’s trust for keeping their funds safe … this ecosystem would link payments, banking, identity and commerce credentials to a funding source that does something no other FinTech or Big Tech ecosystem has been able to do at scale: capture the consumer’s primary paycheck and use it as the flywheel to make funds movement between those various ecosystem endpoints seamless, trusted and secure.
“What all banks and credit unions bring to Google’s table,” wrote The Financial Brand CEO and executive editor Steve Cocheo, “is the ability to offer insured deposits, connections to traditional payment rails, and regulatory compliance experience.”
Fine, but what’s in a Google alliance for banks? Citing consultants Richard Crone and Heidi Liebenguth of Crone Consulting, Cocheo suggests that merely avoiding being left out may provide incentive for financial institutions to play ball with Google:
If they aren’t with Google, they’ll be competing with partnerships offering the accounts. A major strength of fintechs … is their known ability to offer a customer experience, and innovation, superior to what most banks and credit unions offer. Those not allying with Google will need to be able to tap internal and vendor expertise to provide competitive digital experiences.
Holdout-purists may view partnering with fintechs as a treasonous act. But pragmatism has a habit of winning out in the end, especially in relatively free markets. This might be a good time to invoke the words of Patrick Henry, spoken in 1765 to the Virginia House of Burgesses on the subject of American independence: “If this be treason, make the most of it.”