Perhaps one of the most surprising changes that technology has ushered in is the concept of data as a product. Now that the cost of data storage has fallen dramatically (and is approaching zero), companies are treating it as a stand-alone resource, worthy of being mined for additional value.
This is one of the reasons Google recently announced that they will offer a consumer checking account backed by CitiGroup and another credit union local to Google’s headquarters.
To be clear, Google is not launching a bank. They're following a strategy my company, Kasasa, has been using for years now. They’re effectively creating a network between financial institutions built on a common product: the checking account. It's inarguable that Kasasa created the first and most powerful network of community financial institutions across the nation. It's in our mission: to enable a network of community banks and credit unions to re-establish themselves as the go-to place for banking products and services and win the war against megabanks. This latest move by Google allows them to shape the user experience and technology that powers the account, without shouldering the full burden of chartering a bank and running it successfully.
Google is hungry for banking data, and they've got a clear path to get it.
Is Google trying to muscle into the banking industry? Yes and no. They’ve built an empire by transforming data from what people do (search terms, browsing, maps) into monetizable insights. Despite the existence of the Google Pay ecosystem, Google knows they’re still missing out on a trove of valuable data (i.e. the transactions housed in a consumer’s checking account). Partnering with multiple financial institutions to offer the same product allows them to quickly scale the user base and collect even more data.
What will Google do with that financial data? That’s much harder to predict. It’s safe to assume they will fall under two categories: “known opportunities,” such as better attribution when a consumer clicks on a Google ad and when they purchase a product, and then “serendipity,” meaning that given enough data and time they will identify opportunities that no one has leveraged or even dreamed about.
It’s also important to note that Google already has a history of selling customer data — something that potential account holders may think twice about. Before, Google could see where customers were shopping online or what purchases they were researching. Now, Google will have direct access to how people are spending and managing their money. Exactly what they will do with all that data remains to be seen.
With enough data you can punch above your weight.
Kasasa has been partnering with financial institutions for 15 years, both offering products that consumers love and operational expertise that community banks and credit unions need in order to spur new growth. The Kasasa network is more than 900 financial institutions strong. And through this partnership, we’ve been able to collect a lot of data and insight — without compromising anyone’s privacy or selling anyone’s information (In 2019, Google was forced to admit that a bug in their social media platform Google+ exposed data for more than 52 million users).
For Kasasa, this transaction data has always held the potential for big things. And we’ve invested in a range of ways to help community banks and credit unions turn it into actionable insights. This holds especially true for institutions with smaller numbers of account holders. Machine learning and advanced data analytics often require large datasets in order to provide certainty in the results. Kasasa is able to anonymize the data from hundreds of institutions, millions of accounts, and billions of transactions, thereby preparing it for an analytical process that is both secure and comparable to the datasets of the megabanks.
By comparing your data against a much larger dataset, Kasasa is able to magnify the significance of the analysis and the opportunities that such analysis reveals. You can enjoy the benefits of large-scale data processing without the requirement (or costs) of collecting it firsthand.
Aim for the moon, hit the bank.
Google has built a reputation for “moonshots,” ideas that stretch the imagination. So you could be forgiven for assuming that Google’s foray into banking is just part of a Google being “Google.” The reality is that Google’s strategy stems not from magical Silicon Valley techno-futurism, but from a fundamental assumption that data is the product. Or at the very least, data is the raw material from which new products will be manufactured.
Banks have always been viewed as a good place to store money, gold, and valuables. At some point most of the money became data stored on a computer, and now all that data has retransformed into something even more valuable than gold: the power to create new products and services that generate revenue.
How should community financial institutions respond to this initiative by a major tech company?
Google has market dominance in many areas. Finance isn’t one of them. And there’s no law or regulation that prevents community financial institutions from adopting the exact same “data is our product” approach and mining the exact same resource that Google is chasing.
Obviously, the challenge for community banks and credit unions is the inverse of Google’s: you have access to the data, but lack the immense computing power and analytical know-how to process it. On the bright side, you can partner with a range of companies who can offer highly sophisticated data services and fill that gap. Look around — Google isn’t your only option, and you may wait a long time before they even consider expanding their network of institutions.
Data is the precious “material” it’s up to you to mint the coin.
One of your first steps on this journey should be to evaluate the data sophistication of your own organization. From there you’ll have a much better sense for the type of partner you need to advance to the next level.
If you’re inclined to see Google’s Cache as a storm cloud over community financial institutions, take heart; the silver lining is pretty thick. First, Google has just confirmed that banking is a space with unmet potential, and second, every investment you make in treating your data as a product will position you to capitalize on the future of digital banking, whatever that looks like.