Google is going to offer checking accounts next year. That’s big, and scary, for a lot of banks. A Reuters article provided these salient quotes:
“Our approach is going to be to partner deeply with banks and the financial system,” sure thin, general manager and vice-president of payments at Google, told the Wall Street Journal in an interview. “It may be the slightly longer path, but it’s more sustainable.”
When asked about Google’s checking accounts plan, U.S. Senator Mark Warner, a Democrat on the Senate panel that oversees banking, said he was “a tech guy,” but that he had “some reservations.”
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So, for now, Google is following a familiar playbook – partner with a bank to do the tough parts of banking (regulatory compliance) and focus on front-end integrations. But that doesn’t mean banks can be complacent.
Banks with modular technology architectures will be better positioned to add/change/delete fintech partners and supplement their capabilities as opposed to building it all in house. This will require most banks to make significant changes to their current architectures. Banks have typically focused on upgrades and maintenance of existing solutions and wrapping their core systems with new layers rather than complete replacement, as the cost, complexity, and risk of a major core modernization project are high. However, postponing major modernization and the implementation of a component-based design with capabilities and services shared across product lines is probably not a feasible long-term go-forward strategy.
Banking customers want IT solutions based around fewer vendors, less customization, and interoperability of components. Think application modernization, APIs, data integration, cloud deployment, SOA, componentization, and analytics.