How Google Pay’s revamp and the Plex checking account will affect the competitive dynamics of the US banking industry

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The tech giant’s updated Google Pay app for Android and iOS includes checking and savings accounts, a service called “Plex,” in partnership with Citi and Stanford Federal Credit Union, CNBC reports.

The bank accounts—which Google initially hinted at in 2019—will launch in 2021, following the initial rollout of the app’s other new features. Google plans to add 11 new partner financial institutions as account providers that users can choose from.

The enhanced Google Pay app’s emphasis on money management tools could be a major customer acquisition advantage. The Plex account is fee-free and carries no minimum balance requirements. And alongside peer-to-peer payments capabilities, Google Pay will boast features including offers and discounts based on spending patterns, account aggregation, spending summaries, and a “goals” tool with recurring transfers.

Users can also link to Google Photos to search receipts and Gmail to see bills and subscriptions. Money management tools like these are valuable to consumers, yet scarcely supported within mobile banking apps from top US incumbent banks, which could make Google’s offering especially attractive.

Here’s how Google Pay’s revamp and the Plex checking account offering will affect the competitive dynamics of the US banking industry:

Google Pay will threaten challenger banks, as many of its upgrades replicate tools at the center of their value propositions. Neobanks’ biggest draws—and main advantages over incumbent banks—are their tech savvy and fee-free offerings. But tech giants like Google boast unparalleled tech prowess, vast resources to fund banking offerings, and massive scale, essentially robbing neobanks of their competitive advantages. And while the Plex accounts are new, Google’s established reputation could be more attractive to consumers than a neobank that is still scaling, especially given existing trust in big tech companies: 54% of global respondents to a 2018 Bain study indicated they trust at least one tech company more than their own bank, for example.

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Incumbent banks, however, won’t be as impacted by Google’s entrance, and its partner banks will directly benefit. US incumbents have huge customer bases and a wealth of expertise in navigating the regulatory complexities of the banking sector, which big tech companies like Google lack. And banks that offer accounts through Google Pay will enjoy widespread exposure, which will be a boon for its smaller partners in particular. It’s therefore likely that more banks will join the roster of partners over the course of next year.

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Source:: Businessinsider – Finance


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