Google is too clever to become a bank, was the sentiment of Forrester’s Ben Ensor and the latest Digital Banking Club debate. A sentiment that has been echoed by the latest Forrester report on Why a Google Bank Won’t Happen. The regulatory requirements alone are enough to send most companies running for the hills at the prospect of entering the banking market, but Google, as many industries have learnt the hard way, is not most companies, writes Billy Bambrough
Google has highly affected, usually to the detriment of its incumbents, every market it has ventured into (and some that it hasn’t). Although it’s had a crack at payments already with its Google Wallet, keeping up the other Google tradition of throwing everything at the wall and seeing what sticks, Google has yet to combine payments into its existing online products, a strategy which would make the wallet not only easier to use but almost difficult to avoid, as we’ve seen from much lampooned Google+.
One of the much under-appreciated outcomes of Google venturing into payments is not that Google wants to become a bank but that the tech monolith wants to redefine what we consider banking to be.
Google has no interest in becoming a retail bank because the current retail banking model is badly suited to the digital world. Legacy issues for banks go far further than using software and computer systems developed in the 70s. The branch network is arguably a white elephant for the banks, at least in terms of payments, remittances and transactional banking. Within just a few years the very idea of visiting a branch for these things will be both impossible and inconceivable.
The digital banks that we have seen so far have been just that – banks doing things traditionally via a digital channel. These "digital" branches are far better defined as direct branches operating via the internet rather than a telephone. The PayPal model of banking is far more likely what we will eventually see from Google.
This model will eventually see a fundamental shift away from grouping savings, payments, loans, and investments together in one company and instead customers will accept deposits with one, make payments with another, and get their mortgage from a third.
The digital assets of Google and the company’s obvious interest in payments and mobile wallets is all the evidence industry incumbents should need to know that this is storm is coming, but unfortunately there’s not a lot to be done but batten down the hatches and hope hurricane Google doesn’t wreak too much havoc.