When the story of the coronavirus is written, when it comes to financial services, the key chapters will focus on the pace at which innovation accelerated — and where a range of players came together to create ecosystems, rather than to simply compete in zero-sum, winner-take-all bids for consumers.
Those ecosystems will leverage the trust that consumers have placed in traditional financial industry players and tech companies of all sizes – including Big Tech, of course.
Where once the marquee names in tech (and no shortage of FinTechs) jockeyed for primary banking services relationships, an increasing number of partnerships are now taking shape.
These collaborations leverage the ease of use demanded (and, in large part, perfected by) app- and platform-driven firms and banks that have the necessary scale and breadth as consumers navigate a rocky economic landscape.
The writing has been on the wall: PYMNTS research has found that though most people are satisfied with their in-place relationships with banks, only about 40 percent of people would be “extremely” or “very” likely to bring their banking relationships to Big Tech or FinTechs.
To that end, BBVA was one of six banks that said on Monday (Aug. 3) that it would work with Google to deliver “smart” digital bank accounts, using Google Pay as an app-driven way to broaden its digital reach and improve users’ experiences with their financial institutions (FIs).
In an announcement, the bank said it would work with Google to debut a co-branded, FDIC-insured, digital-only bank account next year.
In terms of mechanics, the accounts would be offered through Google Pay on the front end, consumer-facing side of the equation, while using BBVA's existing infrastructure to deliver financial services and products to consumers.
The latest roster of names signing on to offer checking and savings accounts through Google Pay joins Citi and Stanford Federal Credit Union, who back in January confirmed reports that they would enter co-branded relationships with Google in 2021.
And as Shayan Khwaja, BBVA executive vice president and director of consumer lending, told Karen Webster in an interview, the latest announcement dovetails with BBVA’s five-year growth plan, springboarding off its previously announced open banking initiative known as BBVA Open Platform.
As he noted, the coronavirus has accelerated the pace of banks’ digital transformation to warp speed. But by and large, Khwaja said, challenges remain in place for those firms that want to reinvent the banking experience and overcome consumers’ inertia (and binary choices of choosing Big Tech over banking or vice versa), while delivering the best attributes of traditional banking and tech-savvy upstarts to end users.
Bringing the best of both worlds together will enable BBVA's (and other banks’) primary checking account holders to get real-time money management tips and stay on top of bill payments — all while linking payment and identity credentials to those checking accounts. In this way, Google gets new users for its Pay offering, and the banks get new customers and strengthen their respective brands.
Ready For The Digital Shift
The pandemic, of course, has given a tailwind to a digital shift that has been pervasive across commerce, to be sure, but also banking, as individuals embrace new habits out of necessity. In discussing how the pandemic has pushed banking’s own digital shift and the way clients’ needs are changing, Khwaja noted that, as announced earlier in the year, through the second round of funding of the Paycheck Protection Program (PPP), BBVA funded approximately $3.3 billion dollars in small business loans. Consumers, he said, have also been paying down debt and saving money, evidence that they’re paying attention to their own financial status.
As Khwaja pointed out, it’s no easy task to create a digital financial services ecosystem. “It’s one thing to have the [technical] ability, but then your clientele needs to adopt,” he told Webster. “You may get the early adopters, but there’s a massive population that you have to convince. It all needs to be user-friendly.”
According to Khwaja, the digital shift is here to stay.
Khwaja noted that his own firm has been pushing ever farther into the digital space during the past decade — with digitally-delivered consumer lending and digital account openings — pointing to a five-year plan that, in part, seeks to grow the bank through collaborations focused on data and technology.
As Webster noted, the collaborations like the ones struck between banks and Google are aimed at delivering banking as a service, while offering a contextualized experience that gives consumers real-time insights into how (and where) they are spending, transacting and shopping. And, as Khwaja said, consumers have increasingly come to expect an Amazon-like experience (in terms of ease of use) as any number of banking activities have made their way online — while those consumers trust banks chiefly because the industry is regulated and has safeguards in place.
BBVA, of course, is only one bank among several collaborating with Google to offer digital accounts — and thus is competing for consumers’ mind share and share of wallet. Against that backdrop, maintained Khwaja, BBVA’s omnichannel approach, which will bring the existing branch network into play, offers a competitive advantage.
As PYMNTS’ own research has shown, brick-and-mortar banking is alive and well. In fact, in the report titled “What is a Bank?”, surveyed consumers said the third-most important banking service is maintaining a physical branch that can be visited as needed.
“It's very much an ecosystem,” Khwaja said of the Google partnership, and added that “we’re bringing the full power of the bank to customers … with a nationwide product that’s very digital."
With a nod to the fact that the Google/BBVA initiative is thus far focused on digital checking accounts, down the road we may see the rise of the “super app” as financial ecosystems take shape and Big Tech and banks join forces.
Webster noted back in November (when the Google and Citi “smart DDA” account was announced) that linking payments, banking, commerce and identity can help financial services fully enter the digital age, becoming a seamless resource that consumers use to plan their daily lives. Digital, in other words, renders money into an abstract concept that is part of better consumer decision-making across channels.
Consumers remain receptive to such everyday apps. In July of last year, PYMNTS research revealed that more than half of U.S. consumers would be interested in an app that offered a broad range of everyday features and functions geared toward money management. Google ranked high among consumers’ choice as a trusted provider of that app — at No. 4, behind PayPal, Amazon and Walmart.
As Khwaja told Webster, “We were talking about digital well before a lot of the naysayers were saying, ‘banking is banking. How are you going to digitize that?' We've been believers in digital for a very long time – and it prepares us to be ready to work with a player like Google in this space."